Overview
In 2023 and 2024, the Securities and Exchange Board of India (SEBI) published several circulars to regulate SEBI-registered Foreign Portfolio Investors (FPIs) in India (covered by aosphere in a Supplementary Memo), specifically aimed at monitoring foreign investors’ equity holdings and ownership concentrations. These rules ensure compliance with SEBI’s regulations governing FPIs, enhancing transparency and maintaining market integrity.
FundApps now supports these additional SEBI FPI rules within our Sensitive Industries package.
The new rules focus on two primary thresholds:
INR 250bn Threshold: The total market value of equity held by an FPI Group in Indian equities cannot exceed INR 250bn (~USD 3bn).
50% Concentration Rule: An FPI Group cannot hold more than 50% of its equity exposure in any single Indian corporate group.
These rules will help you monitor your equity holdings and ensure compliance with SEBI regulations.
Key Rules and Definitions
India SEBI FPI - 250bn - Value
This rule monitors the total market value of equity held by an FPI Group in Indian securities. If the value exceeds INR 250bn (~USD 3bn), it triggers reporting obligations that investors typically prefer to avoid. See the rule’s explanation and instructions for further details.
India SEBI FPI - 50 Percent
This rule ensures that an FPI's investment in equity securities of a single Indian corporate group does not exceed 50% of the FPI's total Assets Under Management in Indian markets. When the threshold is exceeded, it triggers reporting obligations that investors typically prefer to avoid. See the rule's explanation and instructions for further details.
India SEBI FPI - Denominator
This embedded rule calculates the special denominator used in the 50% Concentration Rule, ensuring that the aggregation of equity positions across corporate groups aligns with the regulatory requirements.
Regulatory Data
To monitor the 50 Percent Rule, our Regulatory Data service provides information from a specific repository that identifies the "Indian Corporate Group" associated with each ISIN/security. This information is essential for accurately calculating the concentration. Our Regulatory Data provision ensures that this information is always up to date and automatically updates the IssuerGroupNameIN property.
Using the Rules
Existing clients of the Sensitive Industries service will have access to the SEBI FPI rules as part of their subscription. If there are no Indian FPIs in your firm, these rules will have no effect.
To apply these rules, clients will need to:
Identify the FPI: Specify which portfolios are FPIs by populating the FPI’s name in the ForeignPortfolioInvestorIN property for each portfolio.
Identify the FPI Group: If applicable, specify the name of the FPI Group in the ForeignPortfolioInvestorGroupIN property for each portfolio if it has an FPI Group.
The rules will aggregate positions uniquely based on these properties and monitor compliance with the SEBI FPI thresholds.
Alerts
Two alert types will be triggered based on your positions:
Warning Alert: When positions are close to the thresholds.
Disclosure Alert: When positions have exceeded the threshold, requiring reporting.
Important Notes
FPI Exemptions: We do not code for these exemptions. Whether an exemption applies depends on conditions like statutory restrictions, winding down processes, or newly registered status. If an FPI is exempt, do not declare a value for the ForeignPortfolioInvestorIN property, and assets in that portfolio will not be checked by this rule.
Exempt Apex Companies: Companies meeting the criteria in Section 2(i) and 2(iii) of the SEBI Circular SEBI/HO/AFD/AFD-POD-2/P/CIR/2024/19 dated March 20, 2024 can be identified by the optional property IsExemptApexIssuerIN.
How Does This Relate to Sensitive Industries?
The SEBI FPI rules align with our broader framework for Sensitive Industries and are addressed by aosphere in this context. These rules ensure that Foreign Portfolio Investors (FPIs) adhere to India's regulations while managing their investments in Indian equities. Additionally, they promote transparency in foreign ownership and are essential for ensuring compliance within sensitive industries.
For more details on aspects of the rules and the associated properties, see each rule’s explanation and the associated property’s documentation on docs.fundapps.co. If you need additional support or have questions, feel free to reach out to our Support team.