Why Sebi must ask FPIs to be more transparent
A listed company needs to have a MPS of 25% to ensure sufficient market depth, to avoid market manipulations and to enable meaningful shareholders’ democracy.
A listed company needs to have a minimum public shareholding (MPS) of 25% to ensure sufficient market depth, to avoid market manipulations and to enable meaningful shareholders’ democracy. Let us for instance consider the case of a promoter already holding nearly 75% of shares of a listed company and wants to gain more control over his entity. The promoter may be tempted to set up some entities, preferably abroad, have some step-down entities under them, preferably strewn across tax havens, and then buy some shares of the company from the market in the guise of foreign portfolio investors (FPIs) who can be categorized as public. The term ‘FPI’ encompasses a wide range of Sebi-registered foreign investors—right from foreign governments to regulated entities like foreign banks, insurance companies to endowments and foundations to unregulated funds, subject to conditions.