MUMBAI: Further to the announcement on the relaxation of norms for foreign portfolio investors (FPI) after its board meeting on Thursday, capital markets regulator Securities and Exchange Board of India (SEBI) issued a circular on clubbing of investment limit for the FPIs. SEBI had come up with the new norms following suggestions from the H R Khan committee.
The SEBI circular said clubbing of investment limit for FPIs will be on the basis of common ownership of more than 50 per cent or based on common control as against the current norm of clubbing all entities together for applicable investment for a single FPI. But, clubbing of investment limit of FPIs having common control would not be done if the FPIs are regulated public retail funds or investment managers of such FPIs. Public retail funds are insurance companies, pension funds and mutual funds or unit trusts that are open for retail subscriptions.
This relaxation would give more room for the FPIs to invest in stocks of their choice. “In case, two or more FPIs including foreign governments/ their related entities are having direct or indirect common ownership of more than 50 per cent or control, all such FPIs will be treated as forming part of an investor group and the investment limits of all such entities shall be clubbed at the investment limit as applicable to a single foreign portfolio investor,” the circular said.
In the case of investment by foreign government agencies they will be clubbed with related entities for the purpose of calculation of 10 per cent limit for FPI investments in a single company, if they form part of an investor group, SEBI said. Any breach of the investment limit, the FPI will have to divest the holding within five trading days from the date of settlement of the trades to bring the shareholding below 10 per cent or it would be treated as FDI from the date of breach, SEBI said.