Securities and Exchange Board of India (SEBI) has notified a framework for Category I and Category II Alternative Investment Funds (AIFs) in the infrastructure sector to raise debt by pledging the equity of their investee companies.
- In this regards, SEBI (AIF) Regulations, 2012 has been amended and notified SEBI (AIF) (second amendment) Regulations, 2024.
- The notification was issued in exercise powers conferred under Section 11(1) of the SEBI Act 1992.
Note:
i.This decision has been taken for easing the way for companies to raise debt, and doing business.
ii.It has also provided additional flexibility to AIFs and their investors to deal with unliquidated investments of their schemes.
Highlights:
i.Category I and Category II AIFs can create encumbrances on investee companies’ equity in the infrastructure sector to facilitate debt raising, under Regulation 16(1)(c) and 17(c) of AIF Regulations, subject to compliance with RBI regulations.
- Infrastructure sector companies include those engaged in development, operation, or management of projects listed in the Harmonised Master List of Infrastructure sub-sectors by the Government of India (GoI).
ii.Previously, AIFs were barred from pledging shares for loans due to potential investor losses in case of default by investee companies.
iii.Allowing infrastructure financing via project finance necessitates protection for lenders through equity share pledges, enabling lenders to intervene in case of default.
Key Points:
i.Existing Category I or Category II AIFs that haven’t onboarded investors before April 25, 2024, can create encumbrances on investee company equity for borrowing purposes, but they must disclose this in their PPMs and detail associated risks.
ii.Any encumbrances already made by these AIFs before April 25, 2024, on investee company securities for borrowing can continue if they were disclosed in the Private Placement Memorandums (PPMs).
iii.The pilot Standard Setting Forum for AIFs (SFA) with SEBI’s input, will establish implementation standards ensuring that encumbrances created by these AIFs on investee company equity are solely used for facilitating debt raising in the infrastructure sector.
Sebi Notified BSE to Pay Regulatory Fee on Options Contract
SEBI has notified BSE (formerly Bombay Stock Exchange) to pay regulatory fees based on notional value rather than premium value for options contracts.
- SEBI has instructed BSE to pay a differential regulatory fee for the past periods with applicable interest of 15% per annum on the amount remaining unpaid or belatedly paid or short paid for every month of delay.
Key Points:
SEBI introduced the regulatory fee on recognised stock exchanges under the SEBI (Regulatory Fee on Stock Exchanges) Regulations 2006.
- Under this, exchanges are required to pay fees within 30 days after the conclusion of each financial year, based on annual turnover.
- The rate of regulatory fee was based on the annual turnover of the stock exchanges.
ii.BSE, including the United Stock Exchange merger in FY 2014-15, has been paying regulatory fees on annual turnover to SEBI considering premium value of the contracts instead of notional value.
iii.The computation of the additional amount owed must be certified by a chartered accountant and paid within a month of receiving SEBI’s notification.
Recent Related News:
i.Ahmedabad (Gujarat)-based real estate developer Shivalik Group has received regulatory approval from SEBI for its inaugural fund- Shivalik Investment Fund as a Category II Alternative Investment Fund (AIF). The fund aims to raise Rs.300 crore through private placement including Rs.150 Crore Green Shoe Option.
ii.SEBI introduced a Third (III) Settlement Schemes for entities involved in the Illiquid Stock Options (ISO)/reversal trades segment of Bombay Stock Exchange (BSE) in terms of Section 15JB of the SEBI Act, 1992 read with Regulation 26 of SEBI (Settlement Proceedings) Regulations 2018.
About Securities and Exchange Board of India (SEBI):
SEBI is the regulatory authority for the capital market. It was established as a statutory body in 1992.
Chairperson– Madhabi Puri Buch
Headquarters– Mumbai, Maharashtra
