Sebi board likely to relax rules for MFs, large IPO, FPIs in Friday meet

The regulator may allow MFs to expand business, ease IPO dilution norms, simplify FPI rules and tighten governance of MIIs at its September 12 board meeting

The Securities and Exchange Board of India (Sebi) is expected to clear a wide range of reforms at its upcoming board meeting on September 12. 

The proposals include relaxations in dilution norms for mega initial public offerings (IPOs), simplification of rules for foreign portfolio investors (FPIs), update in stock broker regulations, and easing of rules for accredited investors in certain alternative investment funds (AIFs), according to sources. 

This will be the second board meeting of the financial year, and the third under Chairman Tuhin Kanta Pandey, who has consistently stressed on the need for “optimum regulation”. 

Emailed queries to Sebi remained unanswered until press time. 

On the IPO front, the market regulator may allow lower dilution levels for large issues and grant extended timelines for achieving the 25 per cent minimum public shareholding (MPS) requirement. This may benefit companies such as Reliance Jio Infocomm, which has initiated IPO discussions. These proposals follow Sebi’s earlier recommendations to the finance ministry for amending the Securities Contracts (Regulation) Rules (SCRR). 

Another key decision will be on linking materiality thresholds for related party transactions (RPTs) to the turnover of the listed company — benefitting the bigger firms. The change will reduce the number of such transactions requiring the approval of shareholders and the audit committee. 

If the turnover is between ₹20,001 crore and ₹40,000 crore, the threshold may be kept at ₹2,000 crore plus 5 per cent of the annual consolidated turnover. For turnover of over ₹40,000 crore, the threshold may be ₹3,000 crore plus 2.5 per cent of the turnover or ₹5,000 crore, whichever is lower. 

Strengthening governance of market infrastructure institions (MIIs) may also be taken up, including appointments of executive directors and clearer delineation of roles and responsibilities. However, several revisions are under consideration on concerns of creating 'power centres' within the MIIs. 

For FPIs, Sebi is likely to approve a single-window system — SWAGAT-FI — aimed at low-risk categories such as sovereign funds, government-owned entities, and regulated public funds. The system will reduce paperwork, costs, and compliance burdens.  Sebi may also permit retail schemes based in GIFT City, sponsored by resident Indian non-individuals, to register as FPIs. 

In the case of alternative investment funds (AIFs), flexibility for accredited investors in large-value funds is on the table, along with the creation of a separate category of AIFs tailored to such investors. 

Raft of reforms on cards

  What the Sebi board may take up

 

• Lowering promoter dilution requirements for large IPOs
• Extending timelines for achieving minimum public shareholding
• Strengthening governance structures at MIIs
• A new single-window system for low-risk FPIs
• Moving to reduce paperwork, compliance burden