SEBI | Disclosure norms for unlisted arms of conglomerates

In a significant move aimed at enhancing transparency and accountability in India's corporate landscape, the Securities and Exchange Board of India (SEBI) in its annual report for the year 2022–231 (Report) has proposed to implement comprehensive disclosure norms on unlisted entities of conglomerates. While listed entities have long been subjected to comprehensive disclosure regulations, unlisted companies within conglomerates 'comprising of listed and unlisted entities' have largely been exempted from such stringent reporting standards. SEBI has recognized the need to address this information asymmetry and promote transparency. This strategic step might have implications for businesses operating under such a conglomerate umbrella and, in turn, the broader financial market.

Key aspects:

  • At the heart of this SEBI's initiative lies the recognition of the increasingly complex and interconnected web of corporate entities within conglomerates. In recent years, conglomerates have expanded their operations across diverse sectors through varied legal entities and structures, making it challenging for regulators, investors, and even stakeholders within these entities to have a clear understanding of their accurate financial position and operations, especially given the fact that many of these conglomerates comprise both listed and unlisted entities under the same group.
  • SEBI aims to curtail this lack of transparency, where though the listed entities are subject to disclosures, unlisted entities do not have such obligations under law. This not only poses risks to investors but also has the potential to undermine market stability. The opacity and lack of disclosure regime surrounding unlisted entities within conglomerates can allow for diversion of funds, financial improprieties, and conflicts of interest, which could have consequences for other listed and unlisted entities in the group, the overall health of the conglomerate entities.
  • SEBI intends to facilitate this transparency in conglomerates by mandating group-level reporting of transactions and other financial activities, which would require the unlisted entities within such a group to disclose details of crossholdings and material financial transactions within the conglomerate on an annual basis. Such disclosures will enable regulators and investors to gain better insights into the financial and operational aspects of the companies, which are relevant to them as stakeholders.
  • Given the foregoing, SEBI's proposal to enforce disclosure norms on unlisted entities of conglomerates appears to be multifaceted, which includes disclosure of financial statements that shall provide a clear picture of the financial health of the listed and unlisted entities of the group, improvised corporate governance practices, and robust risk management frameworks within these entities. We must clarify here that SEBI's proposal, in our view, may not be applicable to conglomerates which comprise of only unlisted entities. SEBI's disclosure norms are proposed to be made applicable to conglomerates which have both listed and unlisted entities.
  • SEBI's plan to implement disclosure norms on unlisted entities of conglomerates has several potential benefits as well. First and foremost, it will empower investors with critical information needed to make informed decisions, and the regulators with sufficient disclosures to prevent any major fraud or activities detrimental to the interest of the public. Greater transparency can attract more investments, fostering economic growth. Moreover, improved corporate governance and risk management practices can enhance the overall stability of these entities. This, in turn, can reduce systemic risks in the financial market.
  • However, implementing these norms is not without challenges. For such unlisted entities, compliance could mean increased administrative and compliance costs. Further, the time period to ensure such disclosures and compliances is also a relevant consideration, as companies will need sufficient time to put in place the required processes and policies to ensure compliances.
  • SEBI's plan to boost investor confidence and promote India as an attractive destination for investments, might bring in challenges and adjustments required by conglomerates to meet these new requirements. However, the long-term benefits of increased transparency and improved governance are likely to outweigh the initial hurdles. Additionally, there is no need for extensive concern from unlisted entities as the scope of such disclosures is limited to conglomerates that have both listed and unlisted entities.

SEBI's plans to implement disclosure norms on unlisted entities of conglomerates represent a significant step towards a more transparent and accountable corporate landscape in India. By ensuring that these entities adhere to higher standards of disclosure, governance, and risk management, SEBI aims to protect investors, enhance market stability, and promote sustainable economic growth. However, it remains to be seen how this plan will unfold.

SEBI | Circular on Portfolio Managers' firm-level performance data audit

SEBI had earlier released the SEBI Master Circular dated March 20, 2023 (Master Circular). As per Paragraph 5.3.1 of the Master Circular, Portfolio Managers are required to audit firm-level performance data on an annual basis and submit the confirmation of compliance with Paragraph 4.5.3 of the Master Circular to SEBI within 60 days of the end of each Financial Year. As per the aforesaid requirement, Portfolio Managers are required to consider all clients' portfolios managed i.e., clients of both discretionary and non-discretionary portfolio management services for the purpose of audit of firm-level performance data.

Following the Master Circular, SEBI recently issued a new Circular dated August 2, 2023 stating that Association of Portfolio Managers in India, in consultation with SEBI, shall specify standardized Terms of Reference (ToR) for audit of firmlevel performance data. This will help bring in uniformity in the performance audit of the Portfolio Managers.

Key aspects:

  • Standard ToR shall inter-alia include requirement for Portfolio Managers to consider clients' portfolios under all services for the purpose of auditing firm-level performance data.
  • Performance of advisory clients may be excluded only if performance of such clients, either individually or cumulatively, is not reported or published in any marketing material or website.
  • The standard ToR specified by APMI shall be applicable with effect from October 01, 2023, and shall be mandatorily followed by all Portfolio Managers for the purpose of annual audit of firm-level performance data2 .
  • The Portfolio Managers shall submit the confirmation of compliance with the requirement of annual audit of firmlevel performance data in line with the standard ToR specified by APMI, to SEBI within 60 days from the end of each Financial Year.
  • The aforesaid report on confirmation of compliance to SEBI shall be certified by Directors and Partners of the Portfolio Manager or by persons authorized by the Board of Directors and Partners of the Portfolio Manager.

SEBI | Reduction in listing timeline from T+6 to T+3 days

The Securities and Exchange Board of India (SEBI) through its circular dated August 09, 2023 (SEBI Circular), has shortened the time period needed for listing of securities after an initial public offering closes from 6 working days to just 3 working days. The move offers advantages for both companies issuing shares and investors, bolstering the ease of doing business in India's capital markets.

Key aspects:

  • Applicability
    • Voluntary: For public issues opening on or after September 01, 2023.
    • Mandatory: For public issues opening on or after December 01, 2023.
  • Scope:
    • The securities will now need to be listed on T+3 day as opposed to the present T+6 day, provided T is the issue-closing date.
    • The revised timelines and activities involved in the process are specified in the annexure to the SEBI Circular.
    • As per SEBI (Issue of Capital & Disclosure Requirements) Regulations, 2018 (ICDR Regulations) the T+3 timelines for listing shall be disclosed in the offer documents and allotment of securities, unblocking of public application monies must be included in pre-issue, issue opening, and issue closing advertisements.
Date of notification Event
T Day
  • Electronic applications submission by investors - Before 5:00 PM
  • Physical application submission – Before 1:00 PM
  • Bids modifications - Before 5:00 PM
  • Validation of bid details with depositories - Before 5:00 PM
  • Reconciliation of UPI mandate transactions - Daily basis
  • UPI mandate acceptance time - Before 5:00 PM
  • Issue closure - Qualified Institutional Buyer (QIB) and for Non-Institutional Investor (NII) categories before 4:00 PM and Retail and other reserved categories before 5:00 PM.
  • Submission of final certificates - UPI from sponsor bank before 9.30pm, and Direct bank ASBA/SCSBs/syndicate ASBA before 7.30 PM

Note: On T Day, investors will submit their applications, bids will be modified, depositories will confirm the bid information, there will be reconciliation of UPI mandate transactions, the UPI mandate will be accepted, and the issue will be closed.

T+1 Day
  • Third party check on non-UPI applications - Before 1:00 PM
  • Finalization of rejections and completion of basis - Before 6:00 PM
  • Approval of basis by stock exchange - Before 9:00 PM

Note: On T+1 day, all third-party checks on UPI applications, third-party checks on nonUPI applications are conducted, final certificates are submitted, rejections are finalised, bases are finished, and bases approved by the stock exchange are completed.

T+2 Day
  • Issuance of fund transfer instructions in separate files for debit and unblock. - Initiation: not later than 9:30 AM, completion for fund transfer for Bank ASBA before 2:00 PM and for UPI ASBA before 4:00 PM
  • Corporate action execution for credit of shares - Initiation before 2:00 PM, completion before 6:00 PM
  • Filing of listing application with stock exchanges and issuing of trading notice - Before 7:30 PM
  • Publish allotment advertisement - On the website of the Issuer, Merchant Banker and RTI before 9:00 PM

Note: On T+1 day, instructions for fund transfer, including debit and unblocking, should be issued and completed separately. On T+2 day, crediting of shares, filing of listing application with the stock exchanges, issue of trading notice, and publication of the allotment advertisement must be done on the website

T+3 Day
  • Publish allotment advertisement - In a newspaper
  • Beginning of stock trading

Note: By T+3 day, but no later than T+4 day, the newspaper advertisement for the allocation can be published on T+3 day stock trading begins. The SEBI Circular added that the T+3 timeline for listing shall be disclosed in the offer documents.

  • Others:
    • Lock-in of pre-issue shares: Lock in shall be in compliance with the ICDR Regulations and further operationalisation shall be in line with the Standard Operating Procedure (SOP) of depositories issued vide circular dated August 08, 2023.
    • Compensation to investors for delay in unblocking ASBA application monies: Computation for any such compensation to investors for delay in unblocking ASBA application monies 'if any' shall be done from T+3 day as per circulars dated March 16, 2021 and April 20, 2022.
    • Linking of PAN: Before blocking ASBA application funds, both direct bank and syndicate ASBA applications require Self Certified Syndicate Banks (SCSB) to verify that the PAN mentioned in the application matches the PAN linked to the applicant's bank account. SCSBs must also ensure that the PAN linked to the bank account is included in the bidding data on the stock exchange platform 'NSE/BSE' before blocking ASBA application funds in the applicant's bank account.
    • Third party verifications: The Registrar shall undertake third-party verification of the applications by matching the PAN in the demat account with the PAN in the applicant's bank account. Applications with mismatch will be deemed invalid for finalising basis of allotment.
  • This detailed circular released by SEBI, can be accessed here.

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1. SEBI: Annual Report 2022-23, Clause 1.3.2 B: Conglomerate Disclosures.

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