Sebi tweaks eligibility norms, paves way for fintech firms to set up AMCs

The Securities and Exchange Board of India (Sebi) on Wednesday paved the way for fintech companies and other start-ups to set up asset management companies (AMCs) by tweaking the eligibility criteria. The market regulator also tightened the shareholding norms for companies relisting after undergoing the corporate insolvency resolution process (CIRP) to ensure fair price discovery.

said an entity would be allowed to sponsor a even if it didn’t fulfil the profitability requirement. However, the entity would need to have a net worth of Rs 100 crore. At present, MF sponsors need to have a profitability track record and are required to maintain a net worth of Rs 50 crore.

Industry players said the move would encourage new-age like Paytm, PhonePe, and to set up units.

“A lot of are far from turning profitable. Balancing the risks, is saying you bring double the net worth,” said Dhirendra Kumar, CEO, Value Research.

said the stricter net worth creteria could be eased after the made profits for five straight years.

“The amendment to the eligibilty criteria for sponsoring a is a positive for upcoming entrants like fintech platforms looking to launch a fund,” added Kaustubh Belapurkar, director (fund research), Morningstar Investment Advisers.

A lot of have expressed their intention to foray into the domestic mutual fund space, which has seen its asset growth swell from Rs 10 trillion in 2014 to Rs 30 trillion at the end of last month. At present, the industry has more than 40 players, but the bulk of the assets are concentrated with the top five players. Also, despite the high growth, a lot of foreign players have exited the business.


“While Sebi has been tightening the MF regulations, it realises that more players need to be encouraged to set up AMCs to ensure growth. Already, we have seen many foreign sponsors exit. The new eligibility criteria could encourage new-age, tech-oriented firms to enter the MF fray,” said Joydeep Sen, consultant with PhillipCapital fixed income desk.

Meanwhile, Sebi has said companies relisting after the CIRP will need to have at least 5 per cent public shareholding, which will need to be enhanced to 10 per cent within 12 months and 25 per cent within three years.

The decision to tweak the free float norms for CIRP companies stems from the sharp spurt in shares of Ruchi Soya Industries. The company’s shares had surged more than 450 times after it got relisted following the acquisition by Pantanjali Ayurved under the CIRP. The surge on the ultra-low free float of less than a per cent had sparked a debate whether Sebi and the stock exchanges should revisit rules to ensure fair price discovery.

Other decisions taken by the Sebi board at a meeting held on Wednesday included the removal of minimum promoters’ contribution and lock-in norms for companies raising additional capital and changes to fee structure of investment advisers and relaxations to rules governing investment committees of alternative investment funds (AIF).

The move to do away with the need to bring in the minimum 20 per cent promoter contribution for companies launching further public offers will open up this route for fundraising, said legal experts.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Source link

Leave a Comment

Your email address will not be published. Required fields are marked *