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Sebi approves introduction of Special Situation Funds for investment in stressed assets

The regulator said the minimum investment by an investor can be ₹10 crore, whereas it can be ₹5 crore in the case of an accredited investor, and that the minimum corpus will be ₹100 crore.

The Securities and Exchange Board of India (Sebi) in its board meeting on Tuesday approved the introduction of Special Situation Funds (SSFs) for investment restricted to only stressed assets with a minimum corpus of ₹100 crore. The SSFs will be introduced under Category I Alternative Investment Funds as a sub-category, the regulator said.

The SSFs can invest in stressed assets such as stressed loans available for acquisition in terms of Reserve Bank of India Directions, 2021, or as part of a resolution plan approved under the Insolvency and Bankruptcy Code, 2016. Further, they can invest in securities receipts issued by Asset Reconstruction Companies (ARCs) and securities of companies in distress, Sebi said.

The regulator said the minimum investment by an investor can be ₹10 crore, whereas it can be ₹5 crore in the case of an accredited investor, and that the minimum corpus will be ₹100 crore. The newly announced funds will be exempt from the investment concentration norm in a single investee company and there will be no restrictions on investing their investible funds in unlisted or listed securities of the investee company.

The overall size of the AIF industry surpassed ₹5 lakh crore at the end of September, according to data available with Sebi.  Analysts say investors are betting on several investments besides the traditional ones. The AIF industry is also expected to grow in the coming years, and could reach around ₹30 lakh crore in the upcoming 10 years, according to a report.

The regulator has also made amendments to other regulations, including tighter norms for primary markets, consent for closure of mutual fund schemes and rationalisation of settlement regulations.

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