Only a fifth of foreign portfolio investors (FPIs) in breach of the market regulator-specified thresholds may need to provide enhanced disclosure on ultimate beneficiaries, thanks to exemptions being provided, according to people in the know.


Photograph: Francis Mascarenhas/Reuters

The ultimate beneficial ownership (UBO) disclosures, for FPIs with over 50 per cent holding in a single corporate group or over Rs 25,000 crore exposure to Indian assets, will be required from February 1.

But, depending on their category, FPIs will have 10-30 working days to submit these granular details.


FPIs affected by this will have a further six months, after the 30-day window, to exit holdings or rebalance their portfolio.

In effect, overseas funds will have seven months to comply with the new disclosure norms.

As a result, the sources said, no panic selling is expected, as feared by some market participants.

Initial estimates by the Securities and Exchange Board of India (Sebi) suggest that the assets held by FPIs with holdings above the thresholds were around Rs 2.6 trillion.

The sources said that with the exemptions given in the standard operating procedure (SOP) issued by custodians, the net impact would be “significantly less”.

“Exemptions from enhanced disclosures have been provided to FPIs that are sovereign wealth funds, listed companies on certain global exchanges, public retail funds, and other regulated pooled investment vehicles with diversified global holdings,” said a person with direct knowledge of the matter.

Currently, the value of FPIs’ equity holding is over Rs 60 trillion.

Industry insiders said between Rs 40,000 crore and Rs 60,000 crore worth of FPI assets may need liquidation if additional disclosures of UBOs are not provided.

Over the past week, FPIs have withdrawn nearly Rs 30,000 crore from the domestic markets, which some feared was in anticipation of the enhanced disclosure norms coming into effect.

However, the sources said a large part of this selling is from banking stocks, mainly HDFC Bank, where there are no concerns about high single-group exposure by FPIs.

Most of the FPIs with holdings above Rs 25,000 crore in the Indian markets fall within the exemption list.

People in the know said that in the case of certain FPIs with over 50 per cent exposure in a single corporate group, there is no risk of minimum public shareholding violation in companies that do not have an identified promoter.

Such FPIs can also benefit from the exemptions from enhanced disclosures.

According to the SOP to custodians, government and government-related investors registered as Category 1 FPIs or those with at least 75 per cent direct or indirect ownership by such government and government-related investors are excluded from the granular disclosures.

Further, public retail funds like pension funds, insurance, and reinsurance entities or those structured like mutual funds are also exempted, provided that the custodians follow the specified verification.

Similarly, pooled investment vehicles either registered with the regulatory authority of the respective jurisdiction or regulated by the government also fall on the exemption list.

Exchange-traded funds (ETFs) traded on the exchanges of eight jurisdictions are also exempted but they must have less than 50 per cent exposure in India-listed equities.

These jurisdictions are the US, Japan, South Korea, France, the UK (excluding British Overseas Territories), Germany, Canada, and the International Financial Services Centre (IFSC) in India.

The Sebi board in June 2023 approved changes in the FPI regulation seeking granular details on economic interest from FPIs to address circumvention of the minimum public shareholding norms following the allegations by Hindenburg Research against the Adani group.

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