MUMBAI: Securities and Exchange Board of India (Sebi) chairman U K Sinha said domestic pension funds could provide a panacea to the capital markets as he lamented that the capital raised in primary markets or proposed to be raised was currently at a pathetic level.
Listed private sector companies raised a paltry `1,500 crore over past 11 months, which the lowest on record. This happened despite a great budget.
“The pipeline is also not very strong,’’ he said, asking CII and other members present to ponder on the reasons for this trend. Foreign inflows last year were a robust $46 billion, while net investment by domestic institutions were a pathetic negative figure, even as local mutual funds collected `82,000 crore last year alone, he said.
A well endowed domestic pension fund in India will be the panacea for a robust and sustainable capital market, Sinha said. There is a huge window for long term equity investment in the markets for domestic pension funds which will reduce the vulnerability of the capital markets.
He urged industry to look at National Pension System (NPS) as a social security option for their employees to ensure that large corpus of long term funds are made available for investment in capital markets. The budget made investment in NPS even more attractive. EPFO, which was permitted to invest in equities about a decade ago, had not as yet started investing in shares, he said. The returns on NPS are 400 basis points higher than that offered by EPFO.
On start-ups, he said Sebi will release final guidelines within three months.
“I am amazed at the entrepreneurial energy that we have in India,’’ Sinha told a conference of capital markets here.
“India has the capabilities and the talent to compete with the best in the world.’’
Sinha mentioned of a company that had a turnover of `600 crore from exporting sophisticated engines to some of the world’s biggest and most demanding companies and could easily expand its turnover two to three times but couldn’t because of lack of easy access to capital.
Sebi plans to be flexible in treating these companies since as start-ups their ownership pattern, financing, disclosure requirement would need to be treated differently. Also, some of them could be making losses and yet propose to tap the capital market. Among other issues that would need attention would be lock in of shares.