FPIs trim holdings ahead of deadline on concentrated holdings

Foreign portfolio investors are staring at a September 9 deadline to offload their India holdings that breach the regulator’s norms for concentrated holdings.

Non-compliant FPIs that offload their holdings post this date will be levied a penalty of 5 per cent on their sale proceeds.

Market observers believe that the number of FPIs in breach of these regulations will be few. FPIs sold equities to the tune of ₹621 crore on Friday in the cash segment.

Holding Norms

In a circular issued in August last year, the regulator had listed out two criteria for concentrated holdings. This included FPIs holding more than 50 per cent of their Indian equity assets under management in a single Indian corporate group or FPIs that individually, or along with their investor group, holding more than ₹25,000 crore of equity AUM in Indian equities.

Such FPIs had to provide granular details of all entities holding any ownership, economic interest or exercising control in the FPI, on a “look-through” basis, up to the level of all natural persons, without any threshold.

The circular became applicable from November 1 last year. FPIs with concentrated holdings had to disclose granular details of their beneficial owners or reduce their holdings within 90 days. Those who could not comply by January 29 (end of 90 calendar days), became eligible for disclosure in next 30 working days (by 11 March). They could trade normally during this period.

Those FPIs which did not provide the right disclosures by March 11 lost the validity of their registrations and were given 180 days to sell their position and exit India. Those who did, continued to transact normally.

Separately, in March, the regulator issued another circular providing an additional exemption to FPIs having more than 50 per cent of their Indian equity AUM in a corporate group from the granular BO disclosure obligations subject to certain conditions.