Finance minister Arun Jaitley on Saturday asked Securities and Exchange Board of India (Sebi) to take more measures to deepen the corporate bond market. The regulator responded by announcing the release of detailed rules by September on a Budget proposal to mandate listed firms to raise a quarter of their funds via bonds.
Sebi is also examining alleged lapses by Fortis Healthcare in transferring funds to some promoter-linked firms, chairman Ajay Tyagi told reporters at a briefing after the board meeting of the regulator in the national capital, attended by the finance minister. Media reports claimed on Friday that Fortis’ promoters —the Singh bothers — took around Rs 500 crore at the current exchange rate out of the publicly-traded hospital company without board approval about a year ago. The news prompted stock exchanges to issue notices to the company.
Speaking about the deliberations at the Sebi meeting, Jaitley later said: “One of the factors that stood out from the regulator’s (Sebi’s) presentation is that there is an increased reliance on corporate bonds as far as credit is concerned.” The Budget has made ‘A’ grade corporate bonds eligible for investments, which will result in a larger pool of investment-grade bonds, as the government wanted to nudge firms to diversify their sources of funding. “In India, most regulators permit only bonds with the ‘AA’ rating as eligible for investment,” Jaitley had said in his Budget speech, adding, “It is now time to move from ‘AA’ to ‘A’ grade ratings.” Over 80% of bond issuances come from the ‘AAA’ and ‘AA’-rated companies and the top 10 issuers make up for almost 40% of issuances, according to ICRA.
At Saturday’s Sebi meeting, Jaitley is also learnt to have expressed hope that more IPOs will help the government meet its disinvestment target of `80,000 crore for this fiscal. He also impressed upon Sebi to focus on monetisation of assets through InVITs. Commenting on recent fall in stock markets, Tyagi said small investors need not panic, as they are doing the right thing by investing through mutual funds. But getting returns through this route can’t be as risk-free as bank deposits. Asked if the Budget proposal on a long-term capital gains (LTCG) is causing the stocks markets to crash, Tyagi said while it would be incorrect to totally discount the impact of such a tax, but global factors pose much bigger risks to markets at this moment.
Jaitley, on February 1, proposed to tax LTCG on equities exceeding Rs 1 lakh at 10%, which will likely fetch Rs 20,000 crore a year to the government. The Sensex has shed over 2,000 points this month, responding to a drop in equity markets around the world and the LTCG tax. Good US jobs data spooked global markets and stoked worries about higher inflation. This led to fears that the US Federal Reserve to raise interest rates at a faster pace than expected.
Tyagi said volatility in Indian markets might continue for some time, mainly due to global reasons, although investors need not panic over issues like safety and security of the Indian marketplace.
On crypto-currency, Tyagi said the government has already clarified that these are not legal tenders and a panel is already looking into the issue. The recommendations of this panel are expected to be announced soon, which will determine the specific role Sebi will play in the entire issue. He added that the Sebi board will take up long-pending proposals of the Kotak committee on corporate governance in its next meeting.
