Two FPIs withdraw pleas from SAT, comply with Sebi disclosure mandate

Lotus & LTS were flagged as suspicious by short-seller Hindenburg Research in its report against the Adani group

Two Mauritius-based foreign portfolio investors (FPIs), Lotus Investment and LTS Investment Funds -- whose names had cropped up in the 2023 Hindenburg Research report on Adani -- have withdrawn their appeals against the Securities and Exchange Board of India’s (Sebi) additional disclosure mandate. 

The appeals were scheduled for a hearing on Tuesday, but the FPIs’ legal representative informed the court that they no longer wish to pursue the matter.

The FPIs had sought an extension of the timeline to liquidate and rebalance their portfolios, which were in breach of the new regulations.

However, over the past five days, they have successfully rebalanced their portfolios and liquidated the non-compliant holdings, rendering the appeals unnecessary, according to a person privy to the developments.

The funds had filed their separate pleas in SAT on August 20.

The timeline for rebalancing for FPIs which were in breach of the concentration thresholds specified by Sebi ended on Monday.

The two FPIs were flagged as suspicious by short-seller Hindenburg Research in its report against the Adani group.

Sebi introduced an “additional disclosure” regime for FPIs to prevent misuse of this route, particularly for circumventing the minimum public shareholding norms.

The rules require FPIs with over 50 per cent global exposure to India or holding domestic equities worth Rs 25,000 crore to disclose granular details of ownership and economic benefits. Several categories of FPIs have been exempt from this rule.

Sources said that several other FPIs, which are in default of the August 2023 circular of Sebi, had applied for exemptions but have not been granted any relief.

Regulatory officials have been reiterating that implementation of additional disclosure norms has been smooth with a long glide path given to investors.

The market regulator has also proposed to bring offshore derivative instruments (ODIs), popularly known as P-notes, under the disclosure regime.

Through a circular in June, the market regulator also provided flexibility regarding the post-expiry of registration where FPIs have been offered an additional time to adjust their holdings and structuring as per the new disclosure regime.

The FPIs which had ceased to be “eligible” for continuing their registration, were not allowed to sell their securities as their accounts were blocked. They have been allowed to liquidate their positions within 180 days without penalty and wind-up their India registration through a circular issued on June 5.  

STORY SO FAR
 

The FPIs had sought extension of timeline to liquidate and rebalance their portfolios

Sources said that the two FPIs have liquidated excess holdings

Sebi mandates granular disclosures of beneficial ownership for FPIs breaching specified thresholds
 

The funds had filed their separate pleas in SAT on Aug 20