SEBI chief hopeful of revival in IPOs, frowns upon MFs’ standstill pacts

Our Bureau Mumbai | Updated on September 26, 2019 Published on September 26, 2019

Says the regulator may also appeal against SAT’s order in the Price Waterhouse case

SEBI Chairman Ajay Tyagi, who will be leaving for the US this week for an interaction with foreign portfolio investors (FPIs) there, said that India’s primary markets needed to revive.

The recent market fall and poor sentiment have hit initial public offerings (IPOs), as only six companies managed to raise money via equity listing this year.

FPIs pulled out around $ 4.5 billion from stock markets this year, causing a fall in the markets.

But the recent tax cuts had cheered the markets and there is hope that equity issuances too would revive. SEBI has given its nod to more than two dozen companies for IPO.

Among other things, Tyagi, while speaking at a conference in Mumbai, also said that SEBI did not approve of any standstill agreement between mutual funds and companies. On Tuesday, SEBI has tightened valuation norms for mutual funds in the debt segment. The regulator said that securities where maturity was extended beyond original date of maturity would be considered as ‘default’ grade.

However, one of the leading fund managers told BusinessLine that some of SEBI’s valuation matrix, especially the ‘default’ clause, were harsh on the industry in the given market conditions. The fund manager, who did not want to be named, said that the regulator needed to be pragmatic and flexible due to the looming debt market crisis.

Default clause & Essel case

SEBI’s default clause could lead to fund houses having to mark-down 75 per cent of their principal investment amount in debt and money market security if the corporate entity delayed payment. The Essel Group has said that MFs have decided to give it more time to repay its obligations on debt security. SEBI will now have to clarify if Essel-linked instruments will be considered as default grade or regular.

Talking on the sidelines of the event, Tyagi said SEBI was examining if it should challenge an order by the Securities and Appellate Tribunal in the Price Waterhouse (PW) matter. SAT rejected SEBI’s punishment to PW for its alleged role in the Satyam Computer scam nearly 10 years ago.

Later this week, Tyagi will be speaking at a meeting organised by the US-India Strategic Partnership Group, sources said.

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Published on September 26, 2019
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