I am sanguine IPO markets will take off soon: Tuhin Kanta Pandey

Pandey highlighted Sebi's efforts to engage with foreign portfolio investors and market participants to streamline compliance

Following a stellar 2024, initial public offering (IPO) activity has stalled, with no mainboard listings since mid-February. TUHIN KANTA PANDEY, chairman of the Securities and Exchange Board of India (Sebi), attributes this pause to market volatility triggered by US policy shifts, which have made economic prospects uncertain and forced companies to delay their listing plans. He remains optimistic about a revival in activity. In an interview with Khushboo Tiwari, Samie Modak, and Vikas Dhoot, Pandey highlighted Sebi’s efforts to engage with foreign portfolio investors (FPIs) and market participants to streamline compliance. Edited excerpts:

 

Your initial actions and commentary have been widely praised, particularly the pivot towards deregulation. Any other areas you have identified where there will be relaxations? 

Our departments are engaging with all stakeholders and preparing the road map to review all the regulations. The approach has to be pragmatic. Certain things that are well-settled don’t have to be unsettled just for the sake of change. The change has to be for the better. The aim is to reduce the cost of compliance while maintaining the effectiveness of the regulations. Nobody is saying we should do away with traffic lights. The idea is to ensure they function better, like having more intelligent traffic lights.

 

Calendar 2024 was a record year for IPOs and block deals. In the past two months, activity has stalled. Your thoughts?

Last year, India saw a record number of deals. Lately, we have been experiencing high volatility as US policy has been quite tumultuous. What the US does has several ripple effects. These are some of the small things that happen whenever there are terrible shocks. I am quite sanguine that things will take off from here. There is a big IPO pipeline. I’m sure they are waiting for the right window, as everyone wants to be certain about the demand.

 

The securities transaction tax collection target for 2025-26 is steep. If futures and options volumes cool off further, the Centre may not be able to achieve it.

  It is linked to the market, just like how goods and services tax (GST) is linked to economic growth. We are not trying to artificially bring down volumes. It has to be more orderly. For instance, we now have two days of weekly expiry. We don’t want traders to come and play in the last 10 minutes on expiry day, as this is not adding value to the market.

 

There is some infighting between stock exchanges. Are you okay with the situation? 

We are happy with our market infrastructure institutions (MIIs). Few jurisdictions can boast of such good MIIs. We have a strong network of two exchanges, two clearing corporations, and two depositories. Then there are registrar and transfer agents, custodians, and debenture trustees.

 

Sebi and the entire market ecosystem have done very crucial things in the past three to four years. One is the T+1 settlement — we have demonstrated to the world how it can be done. The second is the direct payouts to clients — this has helped curb broker defaults and Karvy-like episodes. These are strong guardrails now for investor protection.

 

Also, our payment and settlement systems and margin requirements are higher than those in markets like Singapore. The settlement guarantee fund is also robust. All these are safeguards during periods of volatility. MIIs are also commercial entities. They will have competition. The regulator will not allow behaviour that compromises the market ecosystem.

 

Do you plan to shelve the T+0 proposal?

  The pilot can go on. We believe the depth of the market is also important. There are different time zones; investors have to move funds from one geography to another. The idea is not to prove what is possible technologically. What is more important is liquidity and market depth. We should first celebrate T+1 and ensure it goes on smoothly.

 

Sebi has doubled the threshold for additional disclosures by FPIs. Any more relaxations planned? 

We are actively engaging with overseas funds, and I will be travelling to the US to further enhance our interactions with them. Domestically, we have expanded our outreach through our FPI outreach cell. Over the past couple of years, we have reached out to more than 2,000 FPIs. We have implemented several initiatives to improve their experience, and as a result, the average time required for FPI registration has been reduced considerably.

 

What is the status of centralised know-your-customer (KYC)?

  As you are aware, there is no need to repeatedly conduct KYC within the market ecosystem, as there is interoperability among KYC registration agencies. Ideally, we should integrate both the Sebi and the Reserve Bank of India (RBI) systems. We have a subcommittee working on this. Some Prevention of Money Laundering Act rules need to be updated — one set has already been revised. It is crucial to understand each other’s perspectives.

 

Basic KYC should be conducted, but if more is required, a higher level of KYC can be performed, which shouldn’t apply to everyone. I will speak to the RBI governor. This is a very important deliverable.

 

Is there a possibility of Sebi sharing its investigation findings in the Adani-Hindenburg case? Also, what’s the status of reducing timelines for investigations? 

We adhere to a standard operating procedure for all our investigations and will continue to do so. We have fully complied with the directives from the Supreme Court (in the Adani matter). A review was sought by some individuals, but was not granted. We are moving forward, as is the case in other similar situations.

 

We are seeing an increase in settlement cases, with approximately 40 per cent of our cases now being resolved through settlement. The number of cases exceeding two years has also decreased. Our cases vary in complexity, with some requiring extensive investigations. In certain cases, we face cross-border limitations and must rely on multilateral memoranda of understanding with other regulators. Despite these agreements, there have been instances where information was not provided. In such cases, we must inform the International Organization of Securities Commissions that we are not receiving the necessary information.

 

Given the growth of our markets over the past few years, is there a need for more capacity building at Sebi?

  We are adding more manpower while also increasing the use of technology. Certain tasks require human power and application of the mind.

 

Has the employee unrest issue been put to rest? 

I would not like to comment on our internal issues. But I think our people are highly motivated, and I would say they’re quite professional and competent.

 

There is too much back and forth between Sebi and the National Stock Exchange over its IPO. What’s the latest?

  I believe that once we resolve some critical issues, we can proceed. There are three to four key concerns related to governance, technology, litigation, and clearing corporation structures. Once we have a clear road map, we should be able to move forward.

 

Litigation is also a crucial aspect, with some matters already resolved and others still pending. We need to focus intensively on these issues. In the interest of the public, it is imperative that we move forward with clarity.

 

You have taken down online content by finfluencers. Is more action needed? 

When you’re engaged in pure educational content, it generally remains untouched. However, when someone tries to provide specific guidance on a particular stock, assures returns, or acts at the behest of promoters to artificially boost stock prices, these are not straightforward matters. Sometimes, there is collusion with finfluencers, which is outright fraudulent, and such content must be taken down. We are working with various associations of registered entities and have established frameworks to facilitate easier entry.

 

Has Sebi sought more powers from the government to act on misleading content on social media?

  We are currently engaging with the Ministry of Home Affairs and the Ministry of Electronics and Information Technology. A significant amount can be achieved within the existing legal framework.

 

How long should the regulatory forbearance for listed public sector undertakings (PSUs) be extended? Is there a new deadline for all listed PSUs to achieve a public shareholding of over 25 per cent? 

The regulatory forbearance for listed PSUs can be extended based on specific circumstances. Many PSUs have already met the minimum public shareholding (MPS) requirement. However, there are a few cases where achieving MPS is not feasible, and these companies may need to consider delisting. In some instances, particularly with banks that had achieved MPS but saw a reversal due to recapitalisation, they are now working to regain compliance. These situations are relatively rare and do not represent a widespread issue.

 

Sebi has recently introduced the specialised investment funds (SIFs). What more product innovation can we expect? Will Sebi allow cryptocurrency assets?

  We now have real estate investment trusts (Reits), infrastructure investment trusts, small and medium Reits, and SIFs. For the alternative investment fund industry, we are assessing whether accredited investors of a certain size could be granted more relaxations. These investors are capable of managing their risks, so we don’t need to impose a whole host of additional regulations. We can afford them greater freedom to operate. We are also working on energy futures. As for cryptocurrency, that’s a policy decision for the government to make. It will only come under our purview if it is classified as a security to be regulated.

 

Why should Sebi pay GST on its services while it pays no income-tax (I-T) on its income? Is there any need for bringing uniformity either way? 

It is up to the GST Council. Those are not strictly related — GST and I-T are different laws. We are going ahead with whatever the mandate is.