In a respite for housing finance companies, the Securities and Exchange Board of India (Sebi) has decided to relax the investment limit for such entities in debt mutual funds. In its meeting on Saturday, the Sebi board allowed debt mutual funds to take additional exposure in housing finance firms over and above the 30 per cent cap for the financial services sector.
“It has been decided that an additional exposure to the financial services sector (over and above the existing 30 per cent) not exceeding 10 per cent of the net assets of the scheme in debt-oriented mutual fund schemes will be allowed by way of an increase in exposure to HFCs (housing finance companies) only,” the Sebi said in a press release.
In a circular last month, the Sebi had directed mutual funds to ensure the total exposure of their debt schemes in a particular sector did not exceed 30 per cent of the net assets of the scheme.
R V Verma, chairman and managing director, National Housing Bank, said the move would improve liquidity, temper interest rates and integrate the housing finance sector better with capital markets.
The Sebi on Saturday said the relaxation would be subject to certain conditions such as that the securities issued by HFCs were rated ‘AA’ or above. This will qualify companies such as HDFC, LIC Housing Finance, Religare, Dewan Housing and some others.
Also, the HFCs should have been registered with the National Housing Bank (NHB). “However, the total investment in HFCs cannot exceed 30 per cent of the net assets of the scheme,” the release said.
In other decisions, the Sebi has allowed foreign institutional investors (FIIs) to re-invest 50 per cent of their previous year’s debt limit in the current year. This would be applicable from 2014. Further, the utilisation period for government and corporate debt limits for FIIs has been reduced to 30 days and 60 days, respectively, from the earlier 90 days. This will result in greater flow of FII money into the debt market.
Also, FIIs and their sub-accounts can now utilise their corporate debt limits for long-term infra bonds. For this, no prior Sebi approval will be required, till the overall FII investment in the segment reaches the 90 per cent limit. Once the 90 per cent ceiling was reached, the auction mechanism would be initiated for allocation of the remaining limits, the Sebi said.
The regulator will prepare draft guidelines to rationalise and harmonise different routes for foreign portfolio investments. This will be based on the guidance of a working group on foreign investment in India.
The Sebi said it had approved a proposal to amend the Sebi (Depositories & Participants) Regulations to enable warehouse receipts, fixed deposits with banks and corporates, insurance policies, investment products of post offices, among other things, to be held in demat form. “This will enable the investor to view the details of his holdings and transactions across all asset classes through a single consolidated statement,” the Sebi said.
The regulator has also asked stock exchanges to issue an advisory that every company is expected to have a minimum of 25 per cent public shareholders in their companies. As a relief, it has said capital issued outside India is neither included in the numerator nor in the denominator.
“Stock exchanges shall carefully monitor and take steps to issue advisories to shareholders of non-compliant companies about potential penal actions, so that investors have adequate time to safeguard their interests,” the Sebi said.
To give a boost to capital-raising by loss-making listed entities, the Sebi said it had reviewed the eligibility norms for IPOs. It has clarified that listed entities coming out with follow-on public offers (FPOs) need not meet the profitability criteria that companies coming to primary market for the first time have to follow. Currently, any company that wants to raise money through an IPO has to have a consecutive three-year profit record.