Mumbai: The Securities and Exchange Board of India (Sebi) on Friday tightened the takeover code and Issue of Capital and Disclosure Requirements (ICDR) for exemption from open offers, a decision that corporate lawyers said could impact Etihad Airways PJSC's plans to invest in Jet Airways (India) Ltd.
The exemption from making an open offer in case of acquisition of over 26% in a listed company will be allowed only to banks, lenders and financial institutions. “Exemption from open offer will not be allowed to any other person except the aforesaid lenders," according to a Sebi statement issued after a meeting of its board on Friday.
Sebi also removed the “competent authority" clause for exemption from an open offer. Currently, an exemption is allowed from making an open offer to minority investors if there is a court or tribunal order or reference from a competent authority “under any law and regulation Indian or foreign".
This will likely make prospects of any fund infusion by Etihad Airways in Jet Airways difficult as the former was banking on an exemption for making an open offer under this clause, based on a reference from aviation ministry and the directorate general of civil aviation (DGCA).
Now an exemption is only possible if Jet Airways files for bankruptcy with the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC).
“Now a reference from the ministry or a regulator may not be sufficient to get an exemption from an open offer under the proposed amendments. A court order or tribunal ruling that such an exemption from open offer to a private investor is in interest of the company/investors will allow exemption from an open offer," said Tejesh Chitlangi, senior partner, IC Universal Legal.
Sebi also decided to reduce the fees it levies on intermediaries to lower their regulatory burden. The fees has been reduced by 33% for stock brokers, by 99% for commodity brokers, and for filling public issues by 50%. Mint had first reported the proposed reduction in fees for intermediaries on 13 February.
Sebi also finally cleared the decks for domestic institutional participation in the commodity derivatives markets and will amend mutual fund and portfolio management services regulations for these institutions to trade in commodity derivatives.
“Institutional participation will play an important role in adding liquidity and depth to the commodity derivatives market, leading to enhanced efficiency in price discovery and risk management. Moreover, this will provide the Indian investors easy access to a new asset class and cater to their diversified investment and trading needs," said Mrugank Paranjape, managing director and chief executive officer, Multi Commodity Exchange of India Ltd (MCX).
Alternate investment funds (AIF) Category 3 have also been allowed to invest in not just commodity derivatives but also physical commodities.
Recent issues in debt schemes floated by mutual funds had highlighted the law of standard practice for valuing bonds that have fallen below investment grade.
Fund houses followed different timelines to write off below-investment grade bonds because of the lack of standard practice. To address the anomaly, Sebi directed that valuation agencies employed by the Association of Mutual Funds in India (Amfi) will decide on valuing these bonds.
Sebi also approved changes to regulations for infrastructure investment trusts (InvITs) and real estate investment trusts (REITs). The leverage limit for InvITs has been increased from 49% to 70% of InvIT assets, Sebi said.
“It will create the necessary market depth for this yield instrument. It’s a win-win for both investors and developers. While investors will now get attractive equity returns, developers will benefit as these changes will make the InvIT platforms more competitive for acquiring infrastructure projects." said Harsh Shah, chief executive officer of IndiGrid (India Grid Trust).
Allotment by REIT/InvIT shall in the multiples of a lot, each consisting of 100 units. The value of such allotment lot for InvITs shall be ₹1 lakh and for REITs ₹50,000, Sebi said.
