Millennium Post

Govt, regulators mull new norms to lure SWFs, stable foreign funds

Looking to attract larger inflows from sovereign wealth funds (SWFs) and foreign pension funds, central government and financial sector regulators have renewed their efforts to make Indian markets, especially government bonds, much more appealing to such investors. The government and regulators are of the view that overseas investments by sovereign wealth funds, multilateral agencies, endowment funds, pension funds, insurers and foreign central banks are much more stable in nature, as compared to institutional investors and hedge funds.

However, these investors follow a much more stricter due diligence process before taking their investment calls and give a lot of focus on a stable policy regime, a senior official said. With a new government in place at the Centre with a clear majority, there are expectations for a much more stable policy environment in India and this appears to be the right time to work towards attracting such investors, he added. Among others, capital markets watchdog Sebi and banking regulator RBI were asked to identify areas of concerns, if any, for such investors in the current regulatory framework and a final decision in this regard could be announced in the forthcoming Union Budget next month, the official said.

Responding to a query on sovereign wealth funds not showing much interest in government securities, Sebi Chairman U K Sinha recently said that the situation needs to be looked at for some more time. ‘Your point that not much money has come in, I would like to say that you should wait for some more time because there has been a change of government and people outside India are waiting for the new policies. My personal feeling is that it will be successful but we can wait for some more time,’ he had said. At present, $10 billion is the maximum investment limit allowed for entities such as sovereign wealth funds in government securities.

However, just about 21 per cent of this limit is currently exhausted and there is still scope for
investments totalling over Rs 42,000 crore. On the other hand, the limit of $20 billion worth government securities under portion meant for all foreign investors including the institutional investors, hedge funds and others, has been exhausted to the extend of nearly 98 per cent and the free limit currently stands at just about Rs 2,000 crore. In treasury bills also, the investment limit of up to $5.5 billion has been utilised to the extend of only 43 per cent. In the corporate debt category, foreign investors are allowed to invest up to $51 billion, out of which less than 40 per cent
have been exhausted.

RCom raises `4,800 cr in biggest QIP by a private co

Reliance Communications, India's fourth-largest telecom operator, on Wednesday raised Rs 4,800 crore from a share sale to institutional investors, the biggest QIP fund-raising by a private firm.
RCom, headed by billionaire Anil Ambani, will also raise Rs 1,300 crore by issuing warrants to its promoters, which along with the QIP proceeds would go to trimming the firm's huge debt. The company, which opened the qualified institutional placement (QIP) at a price of Rs 142.13 a share, got total bids of more than Rs 12,000 crore, of which it retained Rs 4,800 crore, sources said.
US funds snapped up major portion of offering while over 80 per cent contribution came from overseas bluechip funds.

This QIP is bigger than previous institutional fund raising by Adani (Rs 4,000 crore) and GMR
(Rs 3,966 crore). After the QIP, promoter shareholding in RCom will drop to 60 per cent from 67 per cent while foreign holding will be 23 per cent. The fund raising will help the company reduce its debt that has doubled to Rs 40,177.6 crore in four years. Proceeds of QIP will be used to repay high cost rupee debt. Interest cost savings will be over Rs 800 crore per year, sources said.

The company had on Tuesday stated that its board of directors, besides authorising opening of the QIP, had also approved the issue and allotment of 8.67 crore warrants to the promoters. The offer price of the QIP has been fixed at Rs 142.13 a share, which is a 5 per cent discount to the floor price of Rs 149.61, based on the formula prescribed by Sebi, it had said. ‘The proceeds of the QIP offering and the preferential allotment will be used primarily for repayment of debt and deleveraging the
balance sheet of the company,’ RCom had said. RCom in a stock exchange filing on Tuesday stated that the promoters and promoter group entities would be entitled to as many as 8.67 crore shares (up to about Rs 1,300 crore or $217 million) under the preferential allotment.

‘The promoter/promoter group entities will be required to make payment of 50 per cent of the subscription amount on the date of allotment of the warrants and the balance 50 per cent will be payable on or before 31 March, 2015.’ The firm said in the filing that the floor price for the preferential allotment, based on the formula by Sebi, has been fixed at Rs 150 a share.
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