Mumbai: The Securities and Exchange Board of India (Sebi) has formed a new department that will review company filings for debt raising and address issues that listed companies face in bankruptcy court. This follows greater government and regulatory focus on tackling stressed assets, said two people aware of the matter, including the Sebi chairman.
“Talking about work bifurcation, we have created a separate debt department which is looking at debt instruments such as Real Estate Investment Trusts (REITs), Infrastructure Investment Trusts (InvITs), securitised assets and corporate bonds," Sebi chairman Ajay Tyagi said at an event organized by the Association of Investment Bankers of India in Mumbai on Tuesday.
“The department was made in the last week of November. Among other things, the department would also facilitate and resolve administrative issues that companies undergoing insolvency typically face," said the second person.
Out of the 12 large non-performing assets (NPA) accounts currently under insolvency proceedings, 11 including Bhushan Steel Ltd, Alok Industries Ltd, Amtek Auto Ltd, Lanco Infratech Ltd, Electrosteel Steels Ltd and Era Infra Engineering are listed companies.
Once a company is admitted by the National Company Law Tribunal, its board is no longer in control. The functions of the board and the decisions to keep the firm as a going concern are taken over by the Insolvency Resolution Professional (IRP) appointed by the Tribunal. The IRPs are required not just to keep the company operating but also to suggest a resolution plan to address the debt and make the company solvent. During the process, IRPs faced certain administrative issues.
“For instance, a capital reduction plan currently requires multiple approvals from the regulator and stock exchanges. This needs to be streamlined if it is a part of the resolution plan for easing the processes," said Ashwin Bishnoi, partner, Khaitan and Co.
The department will also ease administrative hassles for new filings and routine Sebi compliances for InvITs and REITs.
InvITs are trusts that own operating infrastructure assets and REITs own real estate assets. So far, only two InvITs — IRB InvIT Fund and Indiagrid Trust — are listed on the stock exchanges, while some other sponsors have received approval to launch their InvITs. Sebi has also created a separate department for mutual funds, said Tyagi.
This is in the wake of the mutual funds’ assets under management (AUMs) hitting a record high of Rs21.4 trillion in October.
“We like this story and we do not want this to be disturbed," said Tyagi.
The Sebi chief also said there are steps planned to further address mis-selling in mutual funds and these would be announced in the coming months. Sebi is also considering whether the mutual fund quota could be increased in qualified institutional placements (QIPs) to increase retail participation in equity markets.
Sebi is also “seriously" looking into complaints about some individuals allegedly circulating key financial details about listed companies on social media groups before they are made public.
“We are taking that (social media leaks) very seriously. How come such messages about reputed listed companies are leaked quite close to the financial results is something we are not going to sit quietly on," Tyagi told reporters on the sidelines of the AIBI summit. The Sebi chief also said that the initial public offering (IPO) pipeline is robust for the next year.
“We have received IPO filings worth Rs86,000 crore and we have cleared 66 (Rs66,000 crore) out of it and 20 (Rs20,000 crore) are pending with us for clearance," said Tyagi. Sebi is also working to further reduce the IPO timeline and has worked on giving quicker clearance to IPOs.
“We have a system to issue initial observations on IPO papers in two weeks and final comments in one week," the Sebi chairman added.