No Immediate Deadline For FPIs To Liquidate Holdings Under Enhanced Disclosures

Foreign portfolio investors have time till September this year incase they are required to liquidate their holdings under the new enhanced disclosure norms and no immediate liquidation is seen on account of these disclosures, according to person familiar with the matter.

FPIs that may be required to provide enhanced disclosures are expected to be significantly fewer than estimated in the consultation paper and the SEBI board note, said the person on the condition of anonymity. The new norms require the FPIs to disclose the ultimate beneficial owner of the assets held by them in India.

According to the board note, SEBI had classified asset under management to the tune of Rs 3 lakh crore as high risk portfolio. This is much lower than estimated.

As part of the process to streamline the disclosures, the regulator and custodians have charted out exemptions to a certain class of investors. These include sovereign wealth funds, listed companies on certain global exchanges, public retail funds, and other regulated pooled investment vehicles with diversified global holdings.

The market regulator has been seeking enhanced disclosures from foreign investors if more than 50% of their assets under management are invested in India or if they have an AUM of over Rs 25,000 crore in India. The exemptions provided have reduced the quantum of high-risk classified assets significantly.

The purpose of the enhanced disclosure was also to ensure that there is no violation of minimum public shareholding norm and SEBI's Substantial Acquisition of Shares and Takeovers Regulations. There’s no risk of minimum public float violation in concentrated FPI holdings in companies with no identified promoter, said the person cited earlier. Companies like ICICI Bank Ltd. or HDFC Bank Ltd. have no identifiable promoters and, hence, exemptions from enhanced disclosures take this into account.

Contrary to market fears, there is no 'immediate deadline or cliff' for FPIs to liquidate any holdings, said the person.

The standard operating procedure followed by the custodians for enhanced disclosures and exemptions were first put up in October 2023. FPIs that met the criteria for enhanced disclosures as of Oct. 31, 2023 had time till January 2024 end to rebalance their holdings. The SEBI circular allowed FPIs to meet the criteria for enhanced disclosures as of January end, with additional 10 to 30 working days to provide the additional details required.

FPIs would have to liquidate their holdings within six months or September only if they fail to provide any details.