 "Sebi to mull new buyback norms, fewer FII routes")
The capital market regulator might bring in rules to shorten the buyback period and put greater onus on companies that embark on such share purchases. “The overhaul of buyback regulations done through open market purchases could be an important item on the agenda,” said a senior Sebi official. Its board is scheduled to meet on June 25.
Sebi plans to increase purchase obligations in share buybacks and bring on more post-offer obligations. The regulator, in January, had released a discussion paper for modification of the framework for share buyback done through the open market route.
The paper proposes to mandate companies to buy back at least 50 per cent of the announced quantity and to put 25 per cent of the maximum buyback amount in an escrow account. It also recommends to shorten the timeframe to just three months from one year at present. Further, it also proposes to bar companies from raising capital for two years, post buyback.
Experts said the market regulator was more likely to come out with a ‘watered down’ version of the discussion paper. Sebi has already announced key changes to buybacks done through the tender method. However, over 95 per cent buyback done in the country was through the open market route.
While the Sebi official declined to divulge anything further about the board meeting, people in the know said Sebi might also take up the issue of rationalisation of foreign institutional investor (FII) investment routes. The regulator is likely to merge certain FII routes into one and announce a new risk-weighted KYC (Know Your Customer) framework for different categories of foreign investors.
In December, Sebi had set up a committee headed by former cabinet secretary K M Chandrasekhar to take steps for implementation of the report of the Working Committee Group on Foreign Investment in India (WCGFII) and suggest measures for combining various foreign portfolio investment routes into one.
The expert group was entrusted with the job to study the operational issues in merging the FII routes and suggest ways for smooth implementation. Sources said the committee has completed its review and will give its report to Sebi this week.
At present, foreign investors can invest through various routes including foreign direct investment, foreign institutional investment, foreign venture capital investment and as qualified foreign investors. Incidentally, the WCGFII, set up by the finance ministry, was headed by U K Sinha, the then chief of UTI Mutual Fund.
Further, the Sebi board could also bring in a new framework for listing of SMES without an initial public offering or compulsory fund raising, an announcement made during the Union Budget said.
The regulator has set up an expert panel of officials drawn from stock exchanges, legal and private equity firms, to suggest new guidelines. The group has already held three meetings and is likely to make the final recommendations soon.
Sources said the Sebi board would also be apprised of the minimum public shareholding drive and discuss if any further action needs to be taken against companies that have failed to comply. The three-week timeframe provided by Sebi for non-compliant companies to respond to its showcause notice ends on June 25.
ON THE ANVIL
- Stricter rules for buyback of shares likely on the agenda
- Foreign institutional investor routes could be merged
- New framework for SME listing to be deliberated
- Board to be apprised of public shareholding