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Tag: sebi

  • NCLT Freezes Gensol’s Bank Accounts Over Financial Misconduct Allegations

    All of Gensol Engineering Limited’s and its affiliated companies’ bank accounts and lockers have been frozen and attached by the Ahmedabad-based National Company Law Tribunal (NCLT).

    The Ministry of Corporate Affairs (MCA) filed a complaint accusing the corporation of financial mismanagement and substantial corporate fraud, which prompted the action.

    The Reserve Bank of India (RBI) and the Indian Banks’ Association were able to move quickly to secure Gensol’s financial assets since the tribunal granted the government urgent interim relief. The goal is to stop additional financial abuse and evidence manipulation.

    The NCLT added that preliminary evidence points to serious wrongdoing on the part of the company’s promoters. It has mandated that all parties involved receive notices.

    SEBI Barring Jaggi Brothers From Accessing Securities Market

    Only a few weeks have passed since Anmol Singh Jaggi and Puneet Singh Jaggi, Gensol’s top promoters, were subject to severe action from the Securities and Exchange Board of India (SEBI).

    Both were prohibited from holding important managerial positions and from entering the securities market by SEBI on April 15.

    According to the regulator’s inquiry, Gensol misappropriated money obtained through an electric vehicle (EV) purchasing programme that was loan-financed.

    SEBI claims that Gensol borrowed INR 975 crore to buy 6,400 EVs but only bought 4,704 of them, costing INR 567.73 crore. Red flags regarding potential fund misappropriation were raised when more than INR 200 crore could not be accounted for.

    ICRA and Care Ratings Downgraded Gensol

    Credit rating agencies ICRA and Care Ratings downgraded Gensol’s INR 2,050 crore debt to default status in February, further compounding the company’s problems. This comprised about INR 400 crore in short-term borrowings and over INR 1,640 crore in long-term loans.

     Gensol allegedly produced fictitious letters asserting they had been consistent with their debt payments in response to enquiries into the abrupt downgrading. State-run lenders IREDA and Power Finance Corporation (PFC) were purportedly the senders of these letters; however, both subsequently denied supplying any such records.

    Additionally, investigations showed that despite the company’s repeated assurances to rating agencies that repayments were being made on schedule, it started to fall behind on payments as early as December 2024.

    Given these events, Gensol has been requested to delay a recently scheduled stock split. In order to properly examine the company’s and connected parties’ financial records, SEBI has additionally mandated the hiring of a forensic auditor.

    Gensol Engineering’s stock has dropped up to 94% from its peak due to persistent governance and financial problems.

    Gensol shares are now subject to the Enhanced Surveillance Measure (ESM) Stage 2 by SEBI, which limits trading to designated hours of the day.

    Due to serious liquidity problems, it is now impossible for the public and other investors to trade or sell their positions on a regular basis, which raises the possibility that they will be stranded with the shares.

  • Groww Secretly Files for IPO with SEBI, Eyes Market Debut

    The first official step towards a stock market debut has been taken by wealthtech unicorn Groww, which has confidentially registered for an IPO through the Securities and Exchange Board of India’s pre-filing method.

     Groww’s parent company, Billionbrains Garage Ventures Limited, stated in a public notice issued on May 26 that the DRHP was filed in accordance with Chapter IA of the SEBI ICDR Regulations, which permits the business to request SEBI’s feedback without immediately making its IPO materials available to the public.

    On May 15, a media outlet exclusively revealed that Groww was raising $150 million from Singapore-based GIC as part of a $250–300 million pre-IPO round and was scheduled to submit a confidential application for an IPO with SEBI in two weeks. Groww’s post-money valuation in the round was $7 billion, according to the report.

    Groww will submit an updated DRHP, which will be publicly available and contain information on the company’s financial performance up to the most recent quarter, after Sebi approves the IPO, which could take up to two months.

    Details of the IPO

    According to reports, Groww is anticipated to adopt a cautious IPO valuation of $7-8 billion, taking into account the volatility and emotion of the market.

    One of the most widely watched public offerings in India’s fintech sector this year, the valuation suggests that an IPO size of between $700–920 million might be implied by a standard 10-15% share dilution. Groww intends to list its equity shares on the mainboards of the NSE and BSE, with a face value of INR 2 apiece.

    Information has not yet been made public, including the offer-for-sale breakdown, fresh issue component, and overall issue size.

    Financial Outlook and Operations of Groww

    The fintech company provides mutual funds and other financial products and competes with Upstox and Zerodha in online discount broking. When it went through its Series E round in 2021, its last valuation was $3 billion.

     Ribbit Capital, Tiger Global, and Peak XV Partners are among its main sponsors. On a consolidated basis, the stockbroking company with the biggest active investor base has more than doubled its FY24 revenue to INR 3,145 crore.

     Although the company’s FY25 financials are not yet available to the public, they will probably be included in the revised DRHP. In the year that ended in March 2024, its consolidated operational profit increased by 17% to INR 535 crore, up from INR 458 crore the previous year.

    For FY23, its total revenue was INR 1,435 crore. Groww reported a combined net loss of INR 805 crore as a result of the Rs 1,340 crore one-time domicile tax. During the most recent fiscal year, Groww relocated its registered office from Delaware, USA, to Bengaluru.

  • SEBI Probes IndusInd Bank Execs Over ‘Egregious Violations’

    On 23 May, the Securities and Exchange Board of India (Sebi) declared that it is looking into possible infractions by senior management of IndusInd Bank, which is accused of accounting crimes worth an estimated INR 3,400 crore.

     Sebi is especially looking into the suspected securities market infractions by bank staff, although the Reserve Bank of India (RBI) will conduct the main probe.

    The Reserve Bank of India is investigating whatever Sebi needs to do in connection with… whatever Sebi’s mandate is… Sebi is doing… According to a report by a media agency, Sebi Chairman Tuhin Kanta Pandey told reporters at an Assocham industry event, “Sebi is looking into any egregious violations by anyone in their capacity.”

    The board of IndusInd Bank confirmed on 22 May that some employees may have been involved in the scam and directed management to alert regulatory and investigation bodies.

    Fraudulent Activities Observed in Various Banking Operations

    The private sector bank is under investigation for engaging in fraudulent practices related to balance sheet disclosures, microfinance portfolios, and derivatives. The bank has started a forensic inquiry and an internal audit examination in response to high-level resignations.

    Senior bank executives, including former Key Management Personnel, had circumvented important internal controls, according to internal audit findings. The central government has been informed by the bank that high management was probably involved in the accounting fraud.

    The financial results for the quarter and year ended March 31, 2025, have been updated to reflect all found errors, according to IndusInd Bank. Incorrect recognition of derivative trades cost INR 1,960 crore, interest income was reversed by INR 674 crore, microfinance fraud cost INR 172 crore, manual entry errors cost INR 595 crore, and slippages climbed by INR 3,400 crore during the March quarter.

    Due to accounting problems in the areas of derivatives, microfinance, and assets/liabilities, the bank had its worst performance in the March quarter of FY25, with a net loss of INR 2,329 crore. The first financial report since the accounting errors were reported was this one.

     However, IndusInd Bank shares rebounded Thursday, closing 1.82% higher at INR 785.10 on the BSE after initially declining 5.89% to INR 725.65, despite the company’s bad quarterly reports. Another aspect concerning the bank is that, as a result of the index rejig, defence PSU Bharat Electronics Limited (BEL) would take IndusInd Bank’s spot in the BSE Sensex.

    The Turmoil will Hamper Bank Performance

    According to financial analysts, IndusInd firm may see muted performance in the near future. The new MD and CEO will have a difficult time reconstructing the firm and winning back investor trust.

    The bank’s Board formed an Executive Committee for temporary operational management after CEO Sumant Kathpalia and Deputy CEO Arun Khurana resigned on April 29. The Board has until June 30 to submit new MD candidates to the RBI, according to a number of media publications.

  • Zomato, Temasek-Backed Shiprocket Pre-Files for IPO with Sebi

    Shiprocket, a rapidly expanding logistics technology firm supported by Temasek and Zomato, has filed a draft red herring prospectus (DRHP) with Sebi in confidence through the pre-filing process, marking the first official step towards becoming public.

    It is anticipated that the proposed IPO will cost between INR 2,000 and INR 2,500 crore. A new issuance component of around INR 1,000 to INR 1,200 crore will be part of this. Existing stockholders will make an offer to sell the remainder.

    The offering is being advised by investment banks Bank of America, JM Financial, Kotak Mahindra Capital, and Axis Capital.

    Shiprocket Opting for Confidential Filing Mechanism

    Shiprocket has chosen to use the Sebi confidential filing process, which enables businesses to postpone making sensitive business information publicly available until closer to the initial public offering. Swiggy, Boat, PhysicsWallah, and other well-known firms have already taken this approach.

    Established in 2012, Shiprocket offers complete logistics services to more than 100,000 small sellers and direct-to-consumer (D2C) firms throughout India. More than half of its merchant base currently resides in Tier-II and Tier-III cities, where the company has established itself as a leader in facilitating e-commerce shipments.

    According to one of its investors, Shiprocket achieved an estimated 20–25% increase and turned cash-flow positive in FY25, even though the growth of e-commerce as a whole slowed.

    Although its net loss increased to INR 595 crore in FY24 as a result of the financial impact of integrating several acquisitions, including RocketBox, Omuni, and Pickrr, it reported operating revenue of INR 1,316 crore, up 21% from the year before.

    Shiprocket Focusing on Three Startegic Areas

    These days, Shiprocket is concentrating on three key areas: rapid commerce, cross-border shipping, and digital payments. It is incorporating logistics platforms such as Porter, Borzo, and Shadowfax under its fast commerce vertical to enable hyperlocal delivery for small and medium-sized enterprises.

    Additionally, it has started collaborating with Swiggy Instamart and Zepto to oversee stock replenishment for dark businesses.

     In a funding extension round last year, Shiprocket raised INR 219 crore at a valuation of $1.2 billion, adding new investors Koch Group, MUFG Bank, Tribe Capital, and Susquehanna to its current backers Temasek, Bertelsmann, PayPal, and Info Edge Ventures.

    IPO Getting Popular Among Indian Startups

    According to a survey by venture debt firm InnoVen Capital, despite global obstacles, a number of high-quality startup companies are expected to go public in 2025, and the funding environment is also expected to improve this year.

    Additionally, it stated that 47% of the 100 startup entrepreneurs who took part in the study anticipate hiring to pick up speed this year.

    According to the India Startup Outlook Report, 63% of people who tried to raise money in 2024 had a positive experience. 79% of founders believe that by 2025, the fundraising climate will improve.

     According to the report, 73% of startup founders now choose domestic initial public offerings (IPOs) as their preferred exit strategy, up from 64% in 2023.

    As per the report, 28% of respondents think AI would significantly affect their business models over the next two to three years, mainly in the fintech and enterprise sectors, given the speed at which AI capabilities are developing. Hiring is also anticipated to increase in 2025.

  • SEBI Moves to Ease Co-Investment Norms for Alternative Investment Funds

    According to reports, the Securities and Exchange Board of India (SEBI) has suggested giving investors more freedom to co-invest with alternative investment funds (AIFs). According to a media report, the regulatory board recommended lifting the ban on AIF investment managers offering advisory services for listed shares.

    To put it simply, co-investment mainly enables the fund to concentrate on areas other than ticket size and portfolio management. Co-investments are typically offered by funds when an investment is too big to fit within the fund or to preserve control over an investment and foster ties with their LPs, who will be tapped for future fundraising.

    Moreover, AIF is a privately pooled investment vehicle that collects money from investors in accordance with a predetermined investment policy and uses it as capital for the investors’ advantage.

    According to the research, under specific circumstances, it has been suggested that managers of AIFs be permitted to provide co-investment opportunities to AIF investors through the co-investment vehicle (CIV) model.

    Separate CIV Scheme for Each Investment

    Additionally, it stated that, in accordance with the shelf PPM for the CIV scheme submitted to the markets regulator, a distinct CIV scheme ought to be introduced for every co-investment in the prospective business being considered for investment under notification to SEBI.

     Up until now, co-investors were required to sell their shares at the same time as AIF on the same conditions and exit price, which limited investor flexibility and made the funds seek to loosen these regulations.

    The change follows calls from venture capital and private equity firms to loosen co-investment requirements in the AIF route starting in 2022. In the meantime, SEBI loosened its regulations in February, allowing AIFs to retain their investments in dematerialised form as of July.

    This is revealed at a time when SEBI is continuously changing the AIF industry’s framework in response to input and difficulties. In September of last year, the regulatory body changed its framework for valuing AIF investment portfolios.

    It stated that securities that were not listed, non-traded, or thinly-traded would be valued in accordance with the current mutual fund regulations (SEBI (Mutual Funds) Regulations, 1996).

    Investor Awareness Gets a Boost with SEBI, Ministry’s ‘Niveshak Shivir’ Rollout

    A strategic planning conference for the Niveshak Shivir project is held in Mumbai by SEBI and the Investor Education and Protection Fund Authority (IEPFA), which is part of the Ministry of Corporate Affairs.

    Niveshak Shivir is a national investor support programme designed to increase financial literacy, lessen dependency on middlemen, and make it easier for investors to recover unclaimed profits and shares. Investors will be able to communicate directly with corporate representatives and Registrars and Transfer Agents (RTAs) for end-to-end support through the initiative’s dedicated helpdesks.

    Later this month, the “Niveshak Shivir” programme will be launched in Ahmedabad and Mumbai, with ambitions to spread to additional cities with significant amounts of unclaimed investor assets.

  • Sebi Accuses Adani’s Nephew of Insider Trading

    According to a document seen by a media house, India’s markets regulator has accused Pranav Adani, the nephew of the billionaire founder and a director of many Adani Group firms, of sharing price-sensitive information and violating laws meant to stop insider trading.

    According to a report, the Securities and Exchange Board of India (Sebi) last year sent a notice to Gautam Adani’s nephew Pranav Adani, accusing him of informing his brother-in-law about Adani Green’s 2021 acquisition of SoftBank-backed SB Energy Holdings prior to the deal’s announcement.

    Pranav Adani acknowledged that “he has not violated any securities law” and that he was looking to resolve the charges “to put an end to the matter, without admission or denial of the allegations”. A media report further claims that settlement terms were being considered.

    Adani Group on the Firing Line

    The Adani group’s most recent hurdle is the scrutiny. Gautam Adani and two Adani Green officials were accused by US authorities last year of allegedly deceiving US investors and paying bribes to obtain contracts for Indian power delivery.

    The group has referred to the accusations as “baseless” and refuted them. According to the SEBI document, which revealed call logs and trading patterns were examined during the investigation, Pranav Adani broke insider trading regulations in 2021 by providing his brother-in-law Kunal Shah with UPSI (unpublished price sensitive information) about the SB Energy acquisition.

     The paper further stated that Kunal Shah and his brother Nrupal Shah made “ill-gotten gains” of 9 million rupees ($108,000) through their trading in Adani Green shares. The Shah brothers claimed in a statement issued by their legal practice that neither malicious intent nor knowledge of any unpublished price-sensitive information was involved in the trades.

    According to the statement, the relevant information was already widely accessible and in the public domain.

    Adani Group-SB energy Largest Acquisition in Renewable Energy Sector

    The largest acquisition in India’s renewable energy industry to date was Adani Green’s purchase of SB Energy on May 17, 2021, for an enterprise value of $3.5 billion.

    According to SEBI, Pranav Adani learnt about the upcoming acquisition two to three days before the deal was concluded on May 16, 2021. SEBI had suggested that Kunal and Nrupal Shah also reach a settlement, but the brothers decided to fight the accusations because they felt the conditions were too harsh.

    Following the conclusion of SEBI’s ongoing assessment of its settlement process, Pranav Adani’s settlement plea will be considered.

  • After Sebi Investigation, BluSmart Selects Grant Thornton for Forensic Audit

    Following a regulatory investigation into co-founder Anmol Jaggi’s suspected financial fraud, electric taxi service BluSmart has hired Grant Thornton. According to a media agency report on 23 April, Grant Thornton will perform a forensic audit of BluSmart’s business operations.

    The action follows Jaggi’s exclusion from the securities market by the Securities and Exchange Board of India (Sebi) due to allegations that he had misappropriated money intended for the purchase of electric vehicles. According to a media outlet, Grant Thornton will be looking into BluSmart’s financial situation, paying particular attention to how money is moved and used.

    The report went on to say that the company’s cash balance looked worrisome and suggested fraud. The auditing firm’s nomination represents the company’s effort to rebuild trust and transparency in the face of growing scrutiny.

    How Sebi Detected the Fraud?

    When Sebi discovered that Jaggi had allegedly diverted money from his publicly traded company, Gensol Engineering, an EV procurement company that leased cars to BluSmart, for personal expenses, the crisis broke out.

    In addition to other indulgences like international travel, golf equipment, luxury goods and payments to family accounts, these included the acquisition of a lavish flat in Gurgaon’s DLF Camellias for INR 42 crore. The alleged fraud stems from a loan of INR 978 crore that was given for the purchase of 6,400 electric vehicles by the state-backed organisations Power Finance Corporation (PFC) and Indian Renewable Energy Development Agency (Ireda).

    Only 4,704 were purchased, according to the market regulator’s findings, leaving an INR 262 crore gap that is thought to have been stolen. In India, BluSmart, a new ride-hailing company that competes with Uber and Ola, ran more than 8,000 electric cabs and built a sizable charging network in Bengaluru, Delhi, and Mumbai. It claimed a 9% market share in the capital city in 2023.

    BluSmart a Sinking Ship

    Numerous senior officials at BluSmart resigned after the scandal at Gensol Engineering. Many users who still had money in their app wallets were left in a state of uncertainty when the company abruptly stopped providing taxi services. The business has made an effort to reassure clients that they will be operational once more.

    BluSmart has not yet released an official statement regarding the situation. Important backer BP Ventures, a division of the British energy behemoth BP, had also said nothing about the events. The scope of financial violations should be clarified by the forensic audit, which will also assist in deciding the best course of action for the struggling taxi app.

    However, Eversource, a private equity firm, has made an offer to purchase BluSmart for between INR 800 and 1,000 crore. Eversource Capital is a climate-focused investment platform. If the purchase goes through, BluSmart’s last known valuation of $300 million (about INR 2,561 crore) would be at least 60% lower.

     According to the media filings, Eversource intends to combine BluSmart with Lithium Urban Technologies, a company in its portfolio, and invest roughly $100 million in the resulting company.

  • SEBI Rolls Out Pilot Framework for Risk-Return Verification in Financial Ads

    The Past Risk and Return Verification Agency (PaRRVA), a new validation agency set up by the Securities and Exchange Board of India (SEBI), is now operational. Its purpose is to verify the performance claims market intermediaries make in their advertisements and communications, investment advisors, research analysts, and stockbrokers, in particular. 

    This is yet another step in SEBI’s ongoing efforts to enhance transparency in the market and protect investors from the kinds of historical data that can mislead.

    The initial stage of the initiative will see SEBI operating a two-month pilot phase. It will be during this period that feedback from stakeholders will be incorporated and used to refine the framework. Agencies will start testing the verification process, but only under the watchful eye of the regulator. The circular makes a concerted push for financial promotions to be governed by a consistent, standardized, and truly accountable performance reporting framework.

    Eligibility and Responsibilities of Verification Agencies

    For a credit rating agency (CRA) to be acknowledged as a PaRRVA, it has to meet severe eligibility norms. These enumerate at least 15 years of operating experience, a net worth of at least 100 crore rupees, and the presence of a robust grievance redressal system that even includes an Online Dispute Resolution (ODR) mechanism. Recognition from SEBI is conferred only after the fulfillment of these prerequisites. Following that, the eligible CRA gets the nod to act as a verification agency.

    CRAs must also partner with a recognized stock exchange that will act as the PDC. The PDC is responsible for data collection from entities such as mutual funds and stock exchanges. In addition, the PDC supervises the verification system, ensuring data integrity, security, and confidentiality.

    Clear Disclaimers and Oversight to Guard Investor Interests

    The verification standards will be defined by PaRRVA, which will also oversee the management of grievances and the storage of all verified records for 5 years at minimum. If and when any risk-return data that has been verified by PaRRVA is displayed, it must be done with mandatory disclaimers that past performance can never be said to guarantee future outcomes, that verified returns do not indicate with certainty that any gains will be produced, and that what clients actually earn may look nothing like what was earned by any hypothetical client. Performative issues and disclaimers aside, how are we actually going to earn our bounce-back after the Great Recession?  How will we also serve you, our clients, in path-breaking ways after we earn that virtue?

    Conflicts between the verification agency and intermediaries will first be handled through internal resolution processes. If any disputes remain unresolved after that, the intermediaries and the verification agency can take them to the ODR platform. For now, SEBI has stated that the entire framework will operate under its oversight. There will be a committee, designated by SEBI, that will supervise the resolution platform.

    This initiative marks a momentous move in making sure that both retail and institutional investors receive credible, clear, and concise information when they are assessing financial products.

  • The Newly Appointed SEBI Chairperson, Tuhin Kanta Pandey, will Serve a Three-Year Tenure

    For a three-year tenure, India’s Finance Secretary Tuhin Kanta Pandey has been named the Securities and Exchange Board of India (SEBI) 11th chairwoman. Madhabi Puri Buch, who will finish her three-year term as SEBI’s first female chairwoman on Friday, February 28, 2025, will be replaced as SEBI chief by the seasoned financial bureaucrat. The Cabinet has authorised the appointment of Pandey, IAS (OR: 1987), Finance Secretary, and Secretary, Department of Revenue, to the position of SEBI chairperson, the government’s Appointments Committee of the Cabinet (ACC) announced in a notification on February 27. The first term of Pandey’s appointment is three years from the day he takes over.

    Who is Tuhin Kanta Pandey?

    Pandey had a stellar career before this, holding important positions such as head of the Department of Public Enterprises (DPE) and the Department of Investment and Public Asset Management (DIPAM). He was especially well-known for managing the historic sale of Air India and LIC’s initial public offering. In his capacity as Finance Secretary, Pandey played a critical role in overseeing the ministry’s functioning and providing policy advice to the Finance Minister. He played a key role in forming India’s fiscal and economic policies while representing the ministry before the Parliamentary Public Accounts Committee. With his extensive background in financial management and governance, Pandey now leads SEBI, ushering in a new era in his remarkable career.

    Pandey has an MBA from the UK and an MA in Economics from Punjab University in Chandigarh. Throughout his career, he has held important administrative positions in both the central and state governments of Odisha. In addition to holding a number of jobs in industries like health, transportation, and commercial taxation, he was the Deputy Secretary in the Ministry of Commerce and the District Collector of Sambalpur. Prior to his leadership position at DIPAM, where he oversaw significant disinvestment activities, he served as Joint Secretary at the Planning Commission. In 2021, he also served for a short time as Secretary in the Ministry of Civil Aviation.

    He has held a number of positions with the Indian and Odisha governments. Kanta Pandey was the administrative head of the departments of finance, transportation, general administration, health, and commercial taxation in the early years of his career.

    In addition, the top officer was the managing director of the Odisha Small Industries Corporation and the executive director of the Odisha State Finance Corporation. His prior roles at the Centre included Deputy Secretary in the Ministry of Commerce, Joint Secretary, Cabinet Secretariat, and Joint Secretary, Planning Commission (now NITI Aayog).

    After Madhabi Puri Buch, Tuhin Kanta Pandey Takes Over

    When the Indian stock market is under negative pressure due to the continued withdrawal of capital by FIIs, Pandey will assume the role of head of the market watchdog. Since January 2025, foreign portfolio investors (FPIs) have taken out about INR 1 lakh crore.

    In order to prevent retail investors from placing bets on dangerous financial instruments, Madhabi Puri Buch, the first woman to lead SEBI, implemented significant regulatory measures, including stricter guidelines for India’s derivative markets. In order to expand the scope of financial investments, Buch promoted safer, modest investment possibilities.

    Additionally, Buch has pushed the Indian markets towards same-day settlement and mandated stricter disclosures for fund houses and corporations. During her tenure, she led a comprehensive reform of the laws governing the trading of equity derivatives in India, which became the leading location for these products globally.

    Why was Madhabi Buch replacedIndia?

    In March 2022, Madhabi Buch became the first woman to serve as the Chairperson of the SEBI. After US short-seller Hindenburg Research accused her of having conflicts of interest with regard to offshore finances associated with the Adani Group, she faced criticism towards the end of her three-year term, particularly from opposition parties. Concerns over possible bias in SEBI’s regulatory operations were raised when the Congress and other opposition parties called for her resignation. Allegations were also made concerning her financial statements’ transparency and potential partiality to particular financial institutions. But she maintained her position despite the accusations, dismissing them as baseless allegations.

  • SEBI wants to Increase the Number of Angel Fund Investors

    By giving angel funds access to a larger pool of accredited investors, the Securities and Exchange Board of India (SEBI), the market watchdog, hopes to broaden the definition of qualified institutional buyers (QIB). The SEBI further suggested lifting the angel fund restriction of 200 investors in its February 21 consultation document. Up till now, private placements have restricted startup investment opportunities to no more than 200 investors under the Companies Act of 2013.

    Institutional investors that invest in securities that might not be accessible to ordinary investors include mutual funds, banks, insurance companies, financial institutions, and foreign institutional investors (FIIs). These investors are known as QIBs. The proposal also intends to require angel funds to onboard and only give investment options to accredited investors with a high risk appetite, out of concern for the investors’ financial well-being and investments.

    Attracting More Investors

    According to SEBI, angel funds can grow by drawing in additional investors who meet regulatory requirements and are independently confirmed to have the requisite risk appetite and understanding. According to SEBI, the deadline for submitting feedback and recommendations on the plan is March 14. The markets watchdog loosened its requirements for alternative investment funds (AIFs) to retain their investments in dematerialised form just days prior to this development.

    Additionally, SEBI stated that, with few exceptions, investments made prior to July 1 will not be subject to this rule. However, in order to stop illegal transactions in investors’ demat accounts, SEBI has also been striving to take the initiative to introduce new technological measures. A few days ago, the markets regulator proposed an authentication system that calls for stock broking or trading apps to detect a user’s unique client code (UCC), in addition to SIM cards and mobile devices.

    Suggested Modifications

    SEBI suggests adding Alternative Investment Funds (AIs) to the ICDR Regulations’ definition of a Qualified Institutional Buyer (QIB), particularly for angel funds. Like QIBs, this inclusion recognises AIs’ financial capability and risk assessment abilities.

    It may be possible to lift the current cap of 200 investors per Angel Fund investment. By drawing in more investors and boosting cash flow to start-ups, this modification aims to support the expansion of angel funds.

    After being evaluated by outside organisations, AIs are thought to possess the financial stability and risk awareness required to make investments in illiquid, high-risk assets like start-ups.

    The regulatory objective of enabling efficient capital raising while protecting investor interests is supported by the inclusion of AIs as QIBs. Angel Funds can invest more in start-ups and promote innovation and economic growth by broadening the pool of qualified investors.

    Comments from stakeholders can be posted on the SEBI website. The goal is to maintain strong investor protection measures while ensuring that the regulatory structure efficiently supports the expansion of angel funds.

    Plum to Invest $6M in Personal Insurance Expansion
    Plum will invest $6 million over the next two years to break into the personal insurance market, expanding its offerings beyond corporate health plans.
    StartupTalkyNitin Konde