The board of capital markets regulatory authority also paved way for direct listing of start-ups and SMEs on the stock exchanges without the requirement of an IPO and approved a new set of rules for angel investors to encourage the spirit of entrepreneurship in the country.
About a dozen of these steps, which were approved by the board of Sebi (Securities and Exchange Board of India) in a meeting here that lasted for over five hours, come at a time when Indian markets have been going through turbulent times amid concerns over falling value of and huge outflows of overseas funds from the country.
With regard to the foreign investors, Sebi's board approved making their registration and compliance requirements much simpler and easier, especially for government entities and large investors like insurers, asset management companies and university funds from abroad.
The board also approved merging different classes of investors such as FIIs, their Sub Accounts and Qualified Foreign Investors (QFIs) into a new category, Foreign Portfolio Investors (FPIs), to put in place a simplified and uniform set of entry norms for them.
Chandrasekhar panel report
The decisions were taken after a discussion on a report of the 'Committee on Rationalisation of Investment Routes and Monitoring of Foreign Portfolio Investments' under the Chairmanship of former Cabinet Secretary K M Chandrasekhar.
In another major step, Sebi has decided to define all investments of up to 10 per cent by any single investor or group as 'portfolio investment', while investments beyond that would be considered as Foreign Direct Investment (FDI).
Sebi has also approved doing away with the current practice of FIIs and their sub-accounts requiring a prior direct registration to operate in Indian markets.
The decisions were welcomed by market participants. Sources said that Sebi board was also apprised of the status report on high-profile matters like Sahara refund case and the minimum public shareholding norms.
The deadline for private sector companies to achieve minimum 25 per cent public holding ended on June 3 and Sebi took interim action against 105 entities for non-compliance.
The deadline for public sector companies to achieve minimum 10 per cent public shareholding ends on August 8. To safeguard the interest of public shareholders, the board also approved making it mandatory for the companies to buyback at least 50 per cent of their repurchase offers.
Besides, the companies would have to complete their buyback offers within six months, from 12 months currently, while those not being able to meet the target would be barred from launching another offer for a period of one year.
The measures, which also include companies being asked to keep 25 per cent of proposed buyback offer amounts in an esscrow account, are aimed at averting the promoters from making non-serious offers to wrongly influence stock prices.
Transparent share allotment
In another major decision, the board approved measures for making transparent the share allotment to certain investors on preferential basis and said that the payments for such issuances would need to be made from their own bank accounts.
There have been concerns that promoters might use the preferential allotment route through front entities and thus hurt the interest of public shareholders.