Sebi seeks parity between foreign currency, rupee convertibles

U K Sinha also called for aligning the time-gap between a foreign currency convertible bond and rupee-denominated domestic bonds

Market regulator Sebi today said it is in favour of allowing rupee convertibles for domestic investors, on the lines of overseas investors subscribing to foreign currency convertible bonds.

"If a foreign investor can subscribe to a foreign currency convertible, why it is not possible for domestic investors to do the same in the rupee? We are working on it but there is a problem with regard to a provision in the Companies Act. We will be approaching the right authorities before finalising our view," Sebi Chairman U K Sinha said today.

Speaking at the Association of Investment Bankers of India (AIBI) summit here, Sinha also called for aligning the time-gap between a foreign currency convertible bond (FCCB) and rupee-denominated domestic bonds (NCDs).

He said he fully supports the industry view that like there is convertibles in foreign currencies, there should be convertible in the rupee too.

The foreign currency conversion in case of FCCBs typically takes 16 months, while this period for domestic currency in case of NCDs is 18 months.

Commenting on the progress of corporate bond issuance, Sinha said that as per the Patil committee recommendations, the infrastructure is in place now.

"Already there is some increase in the number of issuers. However, the real issue is subscribers -- institutional investors like pension funds and insurers which are not allowed into the segment," he said.

Calling for more domestic institutional participation, Shina said the regulators have to relook whether they can allow entities like pension funds and insurance industries to invest more in corporate bonds. "We are having one-on-one dialogues with other regulators and also through the FSDC (Financial Sector Development Council) mechanism."

Sinha highlighted the fact that in the last four years till FY13, shares of two-thirds of the companies that got listed were trading below their respective issue price.

Earlier at the Summit, JM Financial's Nimesh Kampani said the government should divest more and remain minority shareholders in PSUs to help them grow substantially as there will be more freedom for the managements and lesser government interference to run these companies.