The Securities and Exchange Board of India on Wednesday relaxed several rules of share acquisitions in the case of companies with stressed assets, reported Business Standard. The move is expected to help resolve the bad loans burden of Indian banks and also make it easier for investors to buy distressed firms from banks.
“The Sebi board has made decisions to facilitate the resolution of distressed assets, thereby contributing to the efforts made by the RBI and the Insolvency and Bankruptcy Board of India,” said Sebi Chairman Ajay Tyagi.
The board made a few key decisions in a meeting on Wednesday. Among them was banning participatory notes from taking naked positions – situations where investors are not covered against market risks – in the derivatives segment. Participatory notes are issued by registered foreign institutional investors to overseas investors who wish to trade in Indian stock markets without registering themselves with Sebi.
Sebi has also decided that an investor taking over a stressed company in the listed space would be exempted from making an open offer, which is a secondary market offering. Currently, these exemptions are only given to banks.
The other decisions include easing the entry process for foreign portfolio investors and removing the one-year lock-in requirement for private equity investors registered as alternative investment funds in initial public offerings.
The government and the Reserve Bank of India have been struggling to restructure about Rs 7 lakh crore worth of stressed assets.