Indian markets regulator SEBI is looking at a major relaxation in its rules that will allow global sovereign wealth funds (SWFs) to acquire a much larger stake in a local public listed firm without triggering a clause that mandates an open offer to general shareholders of the rest of the company.

SEBI may change its takeover norms for stock exchange listed firm and allow SWFs to buy upto 20 per cent stake without having to make an open offer. Current norms calls for compulsory open offer to purchase an additional 20 per cent stake if an acquirer (except banks and financial institutions like LIC) acquires 15 per cent or more in a listed firm.

Though the relaxation will be subject to other conditions such as the equity purchase does not lead to change in control (that is possible in firms where existing promoters own less than 20 per cent or the firm has a fairly diversified holding structure being essentially a professionally managed firm), it will open up new funding opportunities for Indian listed firms, both already having SWFs as shareholders and others looking at large fund raising.

Another change being considered is counting multiple SWFs from a country as separate investors which can potentially allow, for instance, two SWFs from a country to together own as much as 40% in a listed company. The idea behind this change is that these funds use multiple investment vehicles, which may differ in terms of investment objective and structure.

In the past this rule had been a bone of contention creating roadblocks for investments by Temasek and GIC in India’s largest private lender ICICI Bank.

An important rider is that the change in rules is expected to apply to SWFs of countries with whom India has a Comprehensive Economic Cooperation Agreement (CECA), atleast to begin with. At present India has such an agreement with just two nation Singapore and South Korea, though it is in the process of implementing a similar deal with Malaysia and Japan.

Negotiations are on with countries in European Union, Australia, New Zealand, Canada, Indonesia and Israel for a CECA.

Media reports said, SEBI will be considering the proposed changes in its board meeting next Monday, adding that the market regulator will approve of such exemptions on a ‘case-by-case’ basis.


The clear beneficiaries of the new norms would be Singapore’s SWFs – GIC and Temasek Holdings, the most active SWFs in India.

GIC that opened its ninth global office and its first in India in Mumbai few weeks ago, has investments in more than a dozen Indian companies such as ICICI Bank, Infosys, Tata Motors DVR, Indiabulls Real Estate, Anant Raj Inds, United Phosphorous, Subex, VA Tech Wabag, Prestige Estate Projects and ICSA.

Temasek has investments in ICICI Bank, Bharti Airtel, Bharti Infratel, Tata Sky, Tata Tele among others firms. It had last year struck deals aggregating almost half a billion dollars in Indian firms such as GMR Energy, National Stock Exchange, Max India, Sobha Developers and Lodha Group.

Another key beneficiary could be a firm like Malaysia’s Khazanah that owns 12% stake in India’s largest healthcare firm Apollo Hospitals. Although existing norms does not allow it to raise its holding more than 15% without triggering an open offer, if Apollo Hospitals goes for a large fund raising it could consider bringing in large chunk of fresh money from Khazanah. Khazanah also has investments in firms such as IDFC and Yes Bank.

Other prominent SWFs active in India include funds operated by emirate of Abu Dhabi (UAE) operating the world’s largest SWF besides fund from Norway among others.

The new proposed rules would also open up opportunities for SWFs from other countries to look at India as an investment option.


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