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No provision for standstill agreements between MFs & their borrowers: Sebi

The remarks come a day after Subhash Chandra-led Essel Group claimed it has got unanimous backing from lenders including fund houses to further extend its repayment timelines for its balance dues

Press Trust of India  |  Mumbai 

Ajay Tyagi, Chairman, Sebi at the FICCI's 16th Annual Capital Market Conference – CAPAM 2019’ in Mumbai. Photo: Kamlesh Pednekar
Ajay Tyagi, Chairman, Sebi at the FICCI's 16th Annual Capital Market Conference – CAPAM 2019’ in Mumbai. Photo: Kamlesh Pednekar

Capital watchdog on Thursday made it clear that provision for standstill agreements between mutual funds and their borrowers does not exist in any regulations and all entities need to follow the same.

The remarks come a day after Subhash Chandra-led Essel Group claimed it has got unanimous backing from lenders including fund houses to further extend its repayment timelines for its balance dues.

Mutual funds had first given an extension, called as standstill agreement, to the financially embattled group till September, creating a new precedent. This move was done in the face of a massive decline in the market price of Zee Entertainment Enterprises, the flagship company in the group, where promoters had pledged holdings.

"It is not there in any of the regulations. We have made our position clear. Entities have to follow the regulations that are there. There is no confusion in that," chairman told reporters here.

He was answering a specific question on how standstill agreements continue being forged by entities.

On reports of SBI writing to to make an exception in the DHFL restructuring case, he said we already have regulations on Inter Creditor Agreements (ICA) for mutual funds and that is the policy.

Tyagi hinted that life insurance behemoth LIC may have to divest its holding in NSE which does not meet the norms.

Whatever excess shareholding they have, they will have to divest, he said, adding that there is no deadline by which he expects the divestment.

As per Sebis shareholding norms in case of stock exchanges, an institutional investor can hold up to 15 per cent while a trading member or broker cannot own more than 5 per cent. Earlier LIC was classified as an institutional investor, but after its IDBI Bank acquisition, it is deemed to be a trading member.

LIC and IDBI Bank together own 13.96 per cent in the bourse.

Meanwhile, when asked about the Securities Appellate Tribunal (SAT) judgment in the PwC matter, he said Sebis legal team is examining the same.

Earlier, speaking at the Capam conference organised by industry lobby Ficci, Tyagi said Sebi is re-examining the concept of company promoter and studying if we can shift to controlling shareholders.

He said we have been sticking to the concept of promoters for many years, and need to study controlling shareholders which dominates the developer world.

Sebi is also working on how to increase the pace of rights issues.

Meanwhile, Tyagi also opined that sophisticated investors like mutual funds should not completely depend on credit rating agencies and should have their own way of assessing before taking a call.

He said the unsophisticated investors in the retail category need the rating agencies more.

It is also coming up with mobile applications to increase retail participation in the corporate bond market.

There is also a need to go beyond the current preference for top-rated paper in corporate bonds and also look at extending the tenures.

First Published: Thu, September 26 2019. 15:54 IST
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