Sebi may ease FPI entry with ‘automatic window’ to boost capital inflows

Mumbai: Foreign portfolio investors (FPIs) could be allowed easier entry into India, with the capital markets regulator set to consider an 'automatic window' for them at its board meeting this week, analogous to the diplomatic channel at airports, said people with knowledge of the matter. This automatic window will include simplified registration and reduced compliance requirements, aimed at enhancing ease of doing business, especially given their ongoing exit from the country's equities.

The Securities and Exchange Board of India (Sebi) board is scheduled to meet on September 12.

This measure, if approved, will cover 70% of the 11,913 registered FPIs - including sovereign wealth funds such as GIC of Singapore, ADIA of Abu Dhabi, Norway's pension fund, CPPIB of Canada and public retail funds like Goldman Sachs and Morgan Stanley.

The FPIs manage assets worth ₹81 lakh crore in the country.

"If overseas investors obtain a kind of 'diplomatic passport,' it would make it easier for them to invest in our markets," Ananth Narayan, whole-time member, Sebi, had said at a public event on August 21.

Heavy Outflows Over Past 2 Mths
Narayan, along with Sebi chairman Tuhin Kanta Pandey, met about 250 FPIs in Hong Kong and Singapore last week to understand their requirements and concerns.

FPIs have withdrawn more than ₹83,000 crore from Indian equities since July.

Currently, FPIs access the country through multiple routes based on type of investor, investment and investee. Each route has its own documentation and compliance obligations. While the multiple routes will continue, the proposed single automatic window will enable a unified registration process across all these avenues.

The automatic window will be applicable to FPIs that are at least 75% owned by foreign governments or are appropriately regulated in their home countries.

"Dismantling the artificial barriers and rigid compartmentalisation for foreign capital, even for an identified set of low-risk investors, is a decisive step in the right direction," said Siddharth Shah, partner at law firm Khaitan & Co. "It will simplify the investment process and genuinely underscore India's swaagat, or welcome, to foreign capital."

Anchor Investor Portion in IPOs
Another matter that Sebi intends to review at this week's meeting is a quota for domestic insurance companies and pension funds in the anchor books of IPOs. Though insurance companies and pension funds are anchor investors, they do not have a reservation as domestic mutual funds do.

The Sebi board may also consider lowering the minimum stake sale via an IPO to 2.5%, from 5% for companies with a post-issue market capitalisation exceeding Rs 5 lakh crore. This will ease norms for IPO-bound companies such as Jio Platforms and NSE.