SEBI Chairman On Equity Market Rally, IPO Boom And Change In Promoter Regime

One of the more important changes India’s securities regulator is contemplating is a shift from ‘promoter’ to ‘controlling shareholder’ when describing the ownership of companies and regulating them accordingly.

“Controlling shareholder will be a more logical or rational way to identify the person in charge,” said Ajay Tyagi, chairman of the Securities and Exchange Board of India, when addressing an industry body conference. But, doing away with this concept has some legacy issues, he said.

SEBI published a discussion paper in May, pointing out that a growing number of companies were controlled by private equity and institutional investors, who also enjoy certain special rights. Changes in nature of ownership, it stated in the paper, could lead to situations where persons with no controlling rights and minority shareholding would continue to be classified as a promoter. Would it then be prudent to move away from the ‘promoter’ concept, the discussion paper proposed? Responses to the paper are being examined, Tyagi said on Tuesday.

Among the other issues he commented on in his speech, are;

IPOS: We rarely see IPOs raising funds for financing projects; We have now seen increasingly IPOs providing exits to existing investors.

New SEBI rules for large IPOs recently came into effect.

SPACs: SEBI committee reviewing whether framework for special purpose acquisition companies should be introduced in India with safeguards.

DELISTING: Yet to find a way to address concerns around reverse book building process for delisting. Investor interest needs to be taken care of while looking at delisting pricing.

The regulator recently issued new norms for delisting.

PUBLIC SHAREHOLDING: We are looking at the definition of free float and how that can be linked to minimum public shareholding.

SEBI has issued new rules for minimum public shareholding in insolvent firms seeking resolution.

G-SECs, CORPORATE BONDS: We would like have retail investing with the current retail system along with existing demat accounts.

Examining whether corporate bond ETF will be helpful to increase retail participation.

Regarding the ongoing rally in India’s equity markets, Tyagi said it is largely driven by liquidity and low interest rates.

“It is not totally irrational exuberance.”

Investor interest for the time being is likely to sustain, he added, pointing to the surge in number of demat accounts – 2.5-3 times last year and double this year.

SEBI has been ensuring risk management is in place, Tyagi said.

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