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SEBI to allow accredited investors, make capital markets investing easier, tighten independent director norms

Seeking to strengthen the corporate governance practices as well as attract more investors, markets watchdog Sebi on Tuesday approved stricter norms related to independent directors, reduced the minimum subscription amount for REITs and InvITs and decided to introduce a framework for accredited investors along with other measures.

To provide easy access to investors to participate in public/rights issues by using various payment avenues, Sebi has also decided to permit banks, other than scheduled banks, to act as a banker to such issues.

The board of Sebi, at its meeting in Mumbai on Tuesday, gave its nod to allow resident Indian fund managers to be constituents of foreign portfolio investors and decided to amend mutual fund rules to provide for the investment of a minimum amount as “skin in the game” in the schemes floated by Asset Management Companies (AMCs) based on the risk associated with such schemes.

Continuing efforts to bolster the regulatory framework for independent directors, Sebi has cleared various amendments to rules governing the appointment, re-appointment and removal of independent directors — a move that will also provide more say for public shareholders in the appointment and re-appointment of such people.

The new norms will be effective from January 1, 2022. Under the proposed changes, a listed company will be required to disclose the resignation letter of an independent director and there will be a one-year cooling period for an independent director transitioning to a whole-time director in the same company/ holding/ subsidiary/ associate company or any company belonging to the promoter group.

Further, the process to be followed by the Nomination and Remuneration Committee (NRC) while selecting candidates for appointment as independent directors would become more transparent. These include enhanced disclosures regarding the skills required for appointment as an independent director and how the proposed candidate fits into that skillset, Sebi said in a release.

Continuing efforts to deepen the market for Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs), the watchdog has decided to reduce the minimum subscription amount and trading lot size for them. The minimum application value will be in the range of Rs 10,000-15,000 and the trading lot will be of one unit for REITs and InvITs .Under the current norms, while making an initial public offer and follow-on offer, the minimum subscription should not be less than Rs 1 lakh for InvITs and Rs 50,000 for REITs under the current rules.

Allotment to any investor is required to be made in the multiples of a lot. At present, for initial listing, a trading lot should be of 100 units and during follow-on offer, each lot should consist of the such number of units in its trading lot as it had at the time of the initial offer.

Suraj Malik, Partner — M&A Tax and Regulatory Services — at BDO India said that reduction in application value and trading lot for REITs and InvITs will enable greater retail participation in such instruments. “The government itself is targeting several REITs/InvITs to monetise state and PSU assets and this change will enable them to attract an asset allocation from a wider market of retail investors,” he said.

The regulator will introduce a framework for accredited investors, a class of investors who may be considered as well-informed about investment products. Individuals, HUFs, family trusts, sole proprietorships, partnership firms, trusts and body corporates based on financial parameters would be eligible to be accredited investors.

In addition, the regulator has decided to introduce a minimum unit holders requirement for unlisted InvITs. “The minimum number of unitholders, other than sponsor, its related parties and its associates shall be five together holding not less than 25 per cent of the total unit capital of the InvIT,” Sebi said.

To ease the compliance burden on listed entities, a proposal has also been cleared to merge listing rules pertaining to debt securities and non-convertible redeemable preference shares into a single regulation.
Under the new framework, issuers other than unlisted REITs and InvITs that are in existence for less than 3 years, can tap the bond market on certain conditions.

The Sebi board also cleared a proposal to allow resident Indian fund managers to be constituents of foreign portfolio investors. Besides, changes would be made to the prohibition of insider trading regulations whereby the reward for informants would be hiked to up to Rs 10 crore from the current Rs 1 crore.

Among other measures, the regulator would amend Sebi (Credit Rating Agencies) Regulations, 1999. These regulations were amended “to define a Credit Rating Agency (CRA) in terms of rating of securities that are listed or proposed to be listed on a recognised stock exchange, and to provide for an explanation in clause (f) of Regulation 9 specifying that ratings undertaken by a CRA under the respective guidelines of a financial sector regulator or authority shall be under the purview of the concerned financial sector regulator or authority”.The board also approved Sebi’s annual report for 2020-21.

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Tata Motors share price continues rallying, gains 84% so far this year; outperforms benchmarks

Tata Motors share price has soared 7.5% in the last one month, extending its monstrous rally following the March 2020 sell-off. The stock had tanked 66% in March 2020, only to rally 425% since then as the bulls started asserting control on Dalal Street. On Tuesday Tata Motors shares were trading flat with a positive bias at Rs 343.85 apiece, up 84% so far this year, outperforming benchmark indices. Earlier this month on June 15, Tata Motors hit a fresh 52-week high of Rs 360.55 per share. Tata Motors has a market capitalization of Rs 1.13 lakh crore.

Tata Motors Historical Price: Tata Motors Share price in the last 10 trading session
The share price of Tata Motors has slipped marginally over the last 10 trading sessions. On June 15, Tata Motors share price hit a fresh 52-week high resulting in some profit booking. However, the stock been gaining for consecutive trading sessions since last Thursday. On Tuesday, Tata Motors share price was up 0.22% at Rs 343.85 per share.

The fall in stock price only paves the way for an attractive entry opportunity into the stock. Domestic brokerage firm ICICI Direct advises investors to buy the stock in the range of Rs 348-358 per share, for a target price of Rs 405 per share. A stop loss of Rs 324 apiece has been recommended. “The stock recently registered a breakout above the last four month’s consolidation range (Rs 342- 279), thus opening upside towards Rs 405 levels as it is the measuring implication of the recent range breakout (342-279=63 points) added to the breakout area of Rs 342 signalling upside towards Rs 405,” ICICI Direct said. ICICI has given a three-month duration for this trade to play out.

Tata Motors History and Company profile
Tata Motors is the automobile unit of the Tata Group. The company manufactures passenger cars, trucks, coaches, buses, sports cars, construction equipment and military vehicles. Formerly known as Tata Engineering and Locomotive Company (TELCO), the company was founded in 1945. Tata Motors manufactured its first passenger vehicle in 1991. Tata Motors also owns South Korean truck manufacturer Daewoo and the British luxury vehicle manufacturer Jaguar Land Rover.

Recently, Tata Motors have renewed their offerings in the passenger car segment with the launch of cars such as Tata Tiago, Tata Tigor, Tata Nixon, Tata Harrier, and Tata Altroz. Earlier this month, Tata Motors announced that Both the Jaguar and Land Rover brands would undergo transformation by electrification – six new all-electric Land Rover models would be introduced in the next five years and Jaguar would be completely reimagined as a purely electric brand from 2025.

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How far can RIL share price rise on Mukesh Ambani’s new energy push? Brokerages mixed; check targets

Reliance Industries share price has slumped more than 5% since yesterday morning, despite Mukesh Ambani’s ambitious new energy plans that will see the company invest Rs 75,000 crore over the next three years. While analysts see the new energy business as the next potential value creation engine for RIL, investors seem unimpressed. Today the stock is down 2.6%, trading at Rs 2,097 per share as the worst-performing stock on the BSE Sensex.

On New Energy business
Kotak Securities – Analysts at Kotak Securities believe RIL’s new energy push will be supported by policy incentives. “We believe RIL’s foray could benefit from policy initiatives to encourage domestic manufacturing of solar energy equipment, such as import duties of 25-40% proposed on solar PV cells and module from April 2022 and incentives under PLI scheme,” they said.

Edelweiss – The move from its traditional cash cow to retail and new energy is believed to be an ESG positive move. “We view this as a significant ESG positive. The market may have reservations in the near term though on the start of a new large, long-gestation venture capital like investment subduing already low RoE in the near term,” analysts at Edelweiss said. New energy is expected to provide the next leg of growth.

Retail and Jio on a hyper-growth trajectory
Emkay Global – RIL’s new JioPhone Next, created in partnership with Google was another major announcement of the AGM. Analysts at Emkay Global see 28% revenue CAGR with margins expanding to 10%+ for the core retail business vs targeted topline growth of 3x in five years.

HDFC Securities – With the help of JioPhone Next and Jio’s additional investment in its network during the year and an additional spectrum, HDFC Securities sees Jio’s EBITDA at Rs 491 billion for FY23E with an ARPU of Rs 157. Mukesh Ambani siad that the retail unit of his conglomerate is on a hyper growth trajectory and should grow at least 3x in the next 3-5 years. “We expect RR’s FY23 EBITDA at Rs 142 billion and value it at an EV of Rs 3,802 billion,” HDFC Securities said.

Stock outlook and target price
Motilal Oswal – The brokerage firm has a ‘Buy’ rating on the stock with a target price of Rs 2,430 per share. “The higher multiple for the Digital business captures the revenue opportunity, potential tariff hikes, and opportunity in the Feature Phone market. The higher multiple for the Retail biz captures the acceleration in store openings, digital commerce, and the new JioMart platform,” they said.

Kotak Securities – Analysts at Kotak Securities have maintained their ‘Add’ rating with a fair value of Rs 2,200 apiece. “. We like the long-term transition roadmap, albeit seeing a limited upside to our estimates and valuation in the near term,” Kotak Securities said.

HDFC Securities – HDFC Securities have maintained their ‘Add’ rating on the scrip with a target price of Rs 2,280 per share, down from its previous target of Rs 2,285. The brokerage firm believes the stock is currently trading at 10.9x March-23E EV/EBITDA and 21.0x March-23E EPS.

Edelweiss – Analysts at Edelweiss have retained their ‘Hold’ rating on Reliance Indsutries. “We argue that RIL’s FAANG-like valuation (Jio Platforms and Jio Retail) is misplaced as O2C and telecom make up ~70% of value,” they said.

Emkay Global – The brokerage firm has maintained its ‘Hold’ rating on the stock but increased the target price to Rs 2,330 per share from Rs 2,060 apiece earlier. Emkay has embed 10% premium to cash to account for the new energy business upside.

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GDR manipulation: Sebi bars directors of Sterling Biotech from accessing the securities market

Markets regulator Sebi has restrained the directors of Sterling Biotech Ltd from accessing the securities market in a matter pertaining to fraudulent issuance of global depositories receipts (GDR) by the company. They have further been restrained from holding any position of director or key managerial personnel in any listed company or any intermediary registered with Sebi during the period of restraint.

The directors are Nitin Sandesara, Chetan Sandesara, Rajbhushan Dixit, Vilas Joshi and Priyadarshan B Mehta. The officials are facing debarment from the securities market in the periods ranging between 3 years to 5 years each.
The investigation period was September 01- October 31, 2003.

The company came out with the GDR issuance of 2.32 million amounting to USD 15.37 million on October 1, 2003, Sebi noted in an order passed on Tuesday. Sebi found that the scheme of issuance of GDRs was fraudulent as the firm had entered into an account charge agreement with Banco Efisa Bank for a loan that was availed by Fresia Worldwide Ltd towards the subscription of GDR.

Besides, the account charge agreement was not disclosed to the stock exchanges. The GDR proceeds were pledged as security against the loan. “Sterling in connivance with Fresia devised a fraudulent scheme whereby Fresia received GDRs without paying any consideration for 80 per cent of the GDRs, at the cost of shareholders/investors of Sterling,” Sebi concluded.

Regarding the chairman and managing director of the firm, Nitin Sandesara and director Chetan Sandesara, Sebi said that they are also liable for the fraudulent scheme as they were fully involved in the day-to-day activities of the company. “The directors, namely Vilas Joshi, P B Mehta, Narendra Patel and Rajbhushan Dixit, who even though were Non executive Independent Directors, had clear knowledge of the terms of the Credit Agreement and the Account Charge Agreement,” it added.

Sebi noted that Sterling is in liquidation and that Fresia Worldwide Ltd has been dissolved, thereby, proceedings against the two entities have been disposed of. Through a separate order passed on Tuesday, Sebi exempted Resolute Enterprises Trust from the obligation of making an open offer following its proposed acquisition of shares and voting rights in Sanghi Industries Ltd.

Pursuant to the proposed acquisitions, the trust would directly acquire 5.11 per cent shares and indirectly acquire 26.39 per cent shares and along with the promoter group, will hold an aggregate of 70.33 per cent paid up equity capital in the firm, Sebi noted.

The pre-acquisition and post-acquisition shareholding of the promoters will remain the same and there will also be no change in the public shareholding of the company. The exemption granted by Sebi is subject to certain conditions, including that the proposed acquisitions should be in compliance with market other norms and other applicable laws.

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