The move is to aid the efforts of the government and RBI to combat the menace of non-performing assets: Ajay Tyagi
The Securities and Exchange Board of India (Sebi) has eased takeover norms for the acquisition of distressed assets of listed companies by lenders, exempting them from making open offers for shareholders.
However, shareholders' approval of the stake acquisition, by way of special resolution, would be mandatory for the provision, the regulator decided in its Board meeting on Wednesday.
"Turnaround of listed companies in distress which will benefit their shareholders and lenders," Sebi chairman Ajay Tyagi said after the meeting.
The move is to aid the efforts of the government and Reserve Bank of India (RBI) to combat the menace of non-performing assets (NPAs), he said.
The Sebi Board cleared the proposal to provide an exemption from open offer obligations "for acquisitions pursuant to resolution plans approved by NCLT under the Insolvency and Bankruptcy Code, 2016". Under the Code, lenders or the companies seeking insolvency proceedings have to first approach the National Company Law Tribunal.
The relaxations would be applicable for the lenders under other restructuring schemes undertaken in accordance with the RBI guidelines.
Lenders who acquired shares and proposed divestment with new investors were facing difficulties due to the need of making open offers, which cuts down the funds available for investment. To address the concerns, Sebi decided to extend the relaxations to new investors acquiring shares in distressed companies pursuant to such restructuring scheme.
The Sebi Board also gave green signal to a proposal for tightening rules for participatory notes (P-Notes) by imposing a regulatory fee of $1,000 on issuers of such instruments.
The regulator also barred P-Notes issuances for speculative purpose in order to curb misuse of the instrument for black money laundering.
The capital markets regulator will also rope in a forensic auditor for its ongoing probe into the National Stock Exchange (NSE) co-location case to ascertain whether brokers made unfair gains in connivance with the exchange officials. Tyagi said the regulator is examining the NSE's response to the show-cause notice.
Besides, Sebi announced reform to ease the entry of foreign portfolio investors into the Indian market. It will issue a discussion paper for easier registration of foreign investors. Another discussion paper would be floated for ways to help develop equity derivatives markets.
Moreover, hedge funds investments in commodity derivatives received a thumbs-up – a move aimed at deepening market and boosting liquidity. However, the investment should not exceed 10% of the investible funds in one underlying commodity. At present, institutional participants are not allowed to participate in the commodity derivatives market in India.
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