Latest news with #Ladha
Mint
07-07-2025
- Business
- Mint
Sebi may revisit AIF rules after industry pushback on investor parity norms
Mumbai: The Securities and Exchange Board of India (Sebi) is reviewing a set of new rules for Alternative Investment Funds (AIFs) following growing concerns from fund managers, legal advisors and investors, at least five people aware of the development told Mint on the condition of anonymity. The rules, which came into effect in December 2024, were designed to ensure equal treatment of investors, but many in the industry say they are too inflexible and may disrupt existing fund structures and global investor participation, experts said. AIFs—private pools of capital that invest in startups, real estate, and unlisted companies—have become a major vehicle for capital formation in India. As of 31 March 2025, AIFs had invested ₹5.38 trillion, according to Sebi data. Of this, real estate accounted for ₹69,896 crore, IT services for ₹34,553 crore, and NBFCs for ₹25,564 crore. The 13 December Sebi circular mandates that all AIF investors must be treated equally, both in how capital is drawn down and how returns are distributed. This is based on two key principles: pro-rata rights, which require profits and losses to be shared in proportion to each investor's committed capital; and pari-passu rights, which ensure all investors are treated equally, unless a specific exemption applies. The rules were meant to bring clarity and fairness to the AIF space. But they have also cast uncertainty over existing fund structures, especially those involving differentiated rights, preferred investor classes, or global institutional limited partners (LPs). Before the rule change, private funds had more leeway to tailor rights for different investors. Some offered priority distribution models where 'senior" investors received returns before 'junior" ones, often in exchange for taking on less risk. While Sebi always promoted fair treatment in spirit, these practices were not explicitly restricted until now. The regulator first signalled discomfort with these structures in 2022, when it paused fundraising by funds using such waterfall distribution models. The December circular went further, formalizing a uniform treatment requirement and narrowing the scope for deviation. Seeking clarity on real-world impact Since then, legal and industry experts have warned that the rules, though well-intentioned, could stifle fund design and discourage foreign participation. 'The Sebi circular on pro-rata and pari-passu rights for AIF investors was brought to bring clarity to fund structuring, aiming to ensure fairness and uniformity in investor rights, while carving out limited exceptions for sponsors and other strategic investors," said Moin Ladha, partner at Khaitan & Co. Ladha noted that the transition has raised difficult questions about how the rules affect legacy commitments and deal terms. 'Since its issuance, however, several industry stakeholders have raised concerns regarding its impact on legacy fund commitments and other commercial arrangements necessary for making investment viable," he said. 'While Sebi has not issued a formal clarification so far, it has usually been proactive in engaging with the industry to address practical implementation challenges," Moin added. Industry participants are also seeking clarity on how these rules apply to multi-layered structures, and to Employee Welfare Trusts (EWTs)—entities used by some funds to allocate carried interest or profit-sharing to employees, Moin noted. The circular does allow a few carve-outs. Fund sponsors and managers, for instance, can make subordinated investments—meaning they take more risk and are paid last. Large Value Funds (LVFs), which collect ₹70 crore or more from each investor, can also offer special terms, so long as they're disclosed upfront in legal documents. Even so, legal experts say these exceptions are too narrow to accommodate common practices in the industry. 'Regulatory clarity on the 'pro-rata' part of the December 13, 2024, Sebi circular would go a long way in aligning legal expectations with practical realities for AIFs," said Nandini Pathak, partner, Bombay Law Chambers. She pointed out that global funds routinely use different allocation methods depending on the phase of investment. While capital calls may be based on outstanding commitments, distributions often follow the ratio of actual capital invested. 'Institutional LPs also prefer allocation rules for distributions to be on invested capital ratio basis, as is evident from the ILPA standard term sheet," she said, referring to the guidelines followed by large international investors. Experts argue that Sebi should allow Indian AIFs to adopt such globally accepted practices—provided they're clearly spelled out in the fund's Private Placement Memorandum (PPM), which lays out terms, risks and investment strategy for potential investors. Sebi response in the works To address the feedback, Sebi has formed a Standard Setting Forum (SSF), which is reviewing suggestions and working on a list of investor rights that AIFs may offer on a differential basis without violating the equal treatment rule. 'The SSF is looking at detailed industry feedback and certain reforms are expected," said Vivaik Sharma, Partner at Cyril Amarchand Mangaldas. 'The SSF has specified a positive list of rights which may be provided by AIFs on a differential basis. It should be clarified that any additional rights may be offered to specific investors of AIFs so long they are not prejudicial to any other investor." Some concerns go beyond distribution rights. Experts have pointed to other commercial nuances the rules currently overlook—such as profit-sharing with advisors or offsetting fund expenses across different legal entities in a master-feeder structure, a common setup for funds with international investors. 'When dealing with master-feeder structures where fund expenses are incurred at both levels (main fund and sub-funds), allowing for offsets of the relevant amount of fund expenses incurred at the feeder level when considering the proportionate allocation of fund expenses among investors at the master fund level, are some of the areas for reconsideration," said Clarence Anthony, founder of Clarence & Partners. 'Most of these could be addressed by amending the Implementation Standards for offering of differential rights to select investors of an AIF." People familiar with the matter said Sebi is currently reviewing all industry feedback and may issue formal clarifications or revisions in the coming months.
Time of India
02-07-2025
- Business
- Time of India
RBI's Trust concerns stall wealth transfer plans of India's rich families
Mumbai: A 'trust deficit' between the regulator and several rich Indian families is stalling plans to ring-fence wealth and put in place a succession strategy for the nextgen. Many promoter families hold shares of the companies they own as well as portfolio investments in other securities and listed non-group entities through closely-held non-banking finance companies (NBFCs). Family patriarchs have often preferred transferring their-and other family members'-ownerships in such NBFCs to a trust which holds the investments and distributes the earnings to the trust beneficiaries. This family blueprint to preserve wealth now faces a challenge. The Reserve Bank of India ( RBI ), which regulates NBFCs, is questioning the transfer of ownership of at least four families to discretionary trusts due to the opaque structure of trusts, persons familiar with the subject told ET. If an NBFC holds a substantial stake in any listed entity, an ownership transfer of the finance company also requires the approval of the Securities & Exchange Board of India, under the takeover code. "Perhaps, RBI could take a cue from the approach adopted by Sebi vide its 2017 circular, to consider prescribing conditions for addressing policy concerns over future changes or control structure in a trust," said Moin Ladha, partner at the law firm Khaitan & Co. "In any event, most families would retain the control and only a contractual obligation in the nature of trust is created for achieving continuity and succession planning. So, the eligibility and fit and proper status isn't impacted by the settlement to trust," said Ladha. Live Events Some believe that RBI's reservations may also stem from the fact a promoter giving guarantee to a group company to enable it borrow at a lower interest rate or carry out certain other transaction, may isolate the shares by setting them aside in a trust if the guarantee is invoked. RBI, however, does stall the shift in ownership as long as the NBFC in question is a 'core investment company' holding and managing investments in group companies. Also, core companies which have not raised money from public investors or through bank borrowings, may not need a go-ahead from the regulator. While RBI did not respond to ET's queries, the regulator, sources said, is likely to harbour the view that unlike long-term, strategic holdings in group companies, an NBFC's investments in shares of non-group companies are in the nature of short-term, portfolio investments. Since the latter kind of NBFCs is considered to be dealing in financial securities, RBI does not want them to be controlled by trusts. A discretionary trust is formed by the settlor (who is often the head of the family who transfers the assets), immediate family members are named as beneficiaries, and independent professionals or a trusteeship company serve as the trustees responsible for distributing the earnings of the trust from cash inflows like interest, rent, and capital gains to the beneficiaries in proportions that are not prefixed. "It's sometimes perceived that the RBI is trying to reduce the number of NBFC licence holders. Any transfer of ownership or management application ends in denial. It seems the regulator wants to focus on a few players who do proper compliance. We have seen cancellation of licences for failing to file annual returns or not maintaining adequate capital," said Rajesh Shah, partner at the CA firm Jayantilal Thakkar & Co. Any change in NBFC shareholding resulting in acquisition or transfer of 26% or more of its paid-up capital requires prior RBI approval. "The process is stringent, with RBI empowered to seek additional information during its due diligence. When the acquirer is a trust, KYC compliance extends to both trustees and beneficiaries, posing greater complexity in discretionary trusts where ownership is undefined. Notably, RBI regulations do not prescribe a specific timeline within which such approvals must be granted, making the overall process both document-intensive and time-sensitive for investors and promoters alike," said Isha Sekhri, partner at Isha Sekhri Advisory LLP, a CA firm. Economic Times WhatsApp channel )
Time of India
25-06-2025
- Business
- Time of India
In Swiss they trust, though the banks are not as cool as before
Mumbai: Why are so many Indians parking money in Swiss accounts despite the alpine banks losing their once-famed secrecy? Who are these people? Is it forbidden funds- as one would suspect- or kosher money? Questions are popping out from numbers released by the Swiss National Bank, claiming that Indian money with Swiss banks trebled in 2024. What has happened? Some of the money flowing into the custody of these tight-lipped bankers may have a questionable colour. But, new rules in the UK and other countries, coupled with global uncertainties and choppy currency markets are driving many NRIs, wealthy families leaving India as well as rich residents to keep their money with Swiss banks, say financial advisors and lawyers familiar with such asset planning. According to them, most of the recent deposits piling up in Swiss banks are not 'black money' but funds of overseas Indians moving from other jurisdictions to Switzerland-many choosing to hold family wealth in Swiss foundations and trusts which are governed by friendly regulations. Switzerland offers a framework to recognise trusts formed under foreign law. (Join our ETNRI WhatsApp channel for all the latest updates) "The recent overhaul of the UK's non-dom rules has prompted many NRIs to relocate to either the UAE or Europe. Understandably, they are moving their wealth accounts. Singapore and Switzerland are the natural choices for holding such accounts. This could be the reason for increased remittance to Switzerland. Singapore and Switzerland are increasingly attracting global investors as evolved financial jurisdictions," said Moin Ladha, partner at the law firm Khaitan & Co. Live Events This year, the UK changed its 200-year old regime, causing many NRI families to look for second homes in other countries to escape high tax on overseas earnings and inheritance. The Swiss central bank data show that Indian money held through asset managers, insurers, and other financial intermediaries surged three times to 3.5 billion Swiss franc (or ₹37,600 crore), after falling to a four-year low in 2023. Money in customer (or retail) accounts of Indian clients rose only 11% in 2024. "The numbers point at a broader global trend of capital reallocation driven by regulations and tax," said Ladha. While there is no official statement from Swiss Banks about the reasons for the surge in Indian deposits, it reflects Switzerland's continued status as a trusted financial hub, said Isha Sekhri, who specialises in international and cross-border taxation. The strength and stability of the Swiss Franc amid geopolitical volatility, combined with its safe-haven reputation and agile regulations, make it an attractive destination for capital preservation, she said. While the Swiss currency slipped last year, it has appreciated 9.5% against the US dollar since January, and has outperformed its peers to close 2023 as the best-performing G10 currency. CONFIDENTIALITY LOST However, with countries signing pacts to share information on owners of bank accounts and other financial assets, Swiss banks have probably lost some of their lure to those stashing illicit money. As the Swiss revealed data on active and many closed accounts, the Indian Income tax department and the Enforcement Directorate invoked harsh laws against black money and laundering to question residents and serve notices to several NRIs. "Many of these accounts (linked to Indians) are held through investment vehicles or trusts where Indian individuals are 'ultimate beneficial owners' (UBOs), even if not named directly on the accounts. Enhanced global reporting standards could be contributing to greater visibility of such holdings," said Sekhri, partner at Isha Sekhri Advisory LLP. "Originally, many large families preferred keeping the names of beneficiaries under wraps. Here, Swiss confidentiality came handy, paving the way for estate planning along with tax avoidance," said Mitil Chokshi, partner at the CA firm Chokshi & Chokshi.
Time of India
04-05-2025
- Business
- Time of India
3 words to success: Mukesh Ambani's powerful advice goes viral
The founder of an investment firm recently recounted a meaningful exchange he had with Mukesh Ambani , the wealthiest individual in Asia. Anant Ladha , the entrepreneur in question, turned to LinkedIn to share two snapshots featuring himself alongside the chairman of Reliance Industries . These images were paired with a brief description capturing the heart of their interaction. #Pahalgam Terrorist Attack Code of war: India and Pakistan take their battle to the (web)front Forex reserves show a pauperised Pakistan, a prospering India Pakistan conducts training launch of surface-to surface ballistic missile During this fleeting yet impactful meeting, Ladha managed to ask Ambani a single, significant question: 'What's the key to achieving success?' Ambani's reply was brief, but packed with insight: 'Focus, delegate, and diversify.' by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Has Honda Done It Again? The New Honda CR-V is Finally Here. TheFactualist Undo Ladha highlighted how this short response left a lasting impression on him. He described it as a straightforward yet deeply meaningful reply from the highly esteemed business magnate. His post struck a chord with professionals and entrepreneurs alike, who found both the simplicity and depth of Ambani's message especially compelling. LinkedIn Post Gains Traction The post, which included the pair of photos and the powerful quote, quickly drew attention on the social networking site. Garnering more than 2,000 likes, it became a viral moment in professional circles. Though the comments were not overwhelming in number, they carried strong sentiments of admiration and encouragement. Agencies One commenter praised the post, calling it 'the most priceless photo paired with timeless advice,' while another referred to the encounter as 'a million-dollar moment worth remembering.' Someone else added, 'This is pure gold. While most people chase dozens of goals, the richest man in Asia narrows it down to just three priorities. That's powerful.' Another LinkedIn user wrote, 'Meeting a titan of the business world like Mr. Ambani is an accomplishment in itself. Congratulations!' One person expanded on the essence of Ambani's advice, stating, 'Concentration fuels outcomes, delegation shapes leaders, and diversification safeguards future expansion. Mr. Ambani's words are truly timeless.' Another user added, 'This is genuinely motivating.' The post also attracted many short, enthusiastic responses such as 'Motivating!' and 'Incredible!' Ladha's post not only showcased his rare moment with an industry titan but also served as a reminder of the value of simplicity in wisdom. In an age filled with complex strategies and overwhelming advice, Ambani's three-word formula stood out for its clarity and power. Professionals across various sectors found themselves reflecting on the principles of focus, trust in others, and spreading risk—a trio that, when mastered, can pave the way to lasting success.
Mint
03-05-2025
- Business
- Mint
Sebi eases ESG rating rules. But experts warn of short-term risk
MUMBAI : The market regulator has eased norms for ESG rating providers (ERPs), aligning the framework with that for credit ratings. The changes, effective immediately, aim to improve rating transparency, reduce conflicts of interest, and enhance market confidence, according to a circular issued by the Securities and Exchange Board of India (Sebi) on 29 April. Now, ERPs operating under the subscriber-pays model can withdraw ratings if there are no active subscribers or if a company fails to file its Business Responsibility and Sustainability Reporting (BRSR) report, according to the circular. For issuer-pays models, ratings can be withdrawn only after a minimum period and with bondholder consent in the case of debt securities. While subscribers like banks, insurance companies, or even the rated company itself pay to access the ratings under the subscriber-pay model, the company being rated pays under the issuer-pays model. 'Conditional withdrawal could create short-term volatility in ESG risk perception, especially when driven by administrative lapses such as missing BRSR filings," said Shailesh Tyagi, partner, sustainability and climate change, Deloitte India. However, he said, clear and transparent documentation of withdrawal rationale could help mitigate long-term reputational risk. Moin Ladha, partner at Khaitan & Co., said ratings retracted or revised unexpectedly could lead to 'fluctuating investor confidence, particularly if the conditions for withdrawal are not clearly defined or consistently applied". The Sebi circular also revamped disclosure rules for ERPs. Subscriber-pays ERPs are no longer required to publish detailed rating rationales publicly, easing their compliance burden. However, they must disclose assigned ESG ratings in a standardised, year-wise format, including details of the rated entity, sector, and the date of rating. Additionally, stock exchanges must now host ESG ratings on dedicated sections of company and debt security pages to ensure better investor visibility. Ladha said the increased compliance burden from simultaneous disclosures and reliance on public data may raise operational costs. 'ERPs may need to explore hybrid or issuer-pays models to maintain profitability and competitiveness. These changes aim at improving rating credibility, but they could challenge the subscriber-pays model's viability unless ERPs adapt effectively," he said. However, according to Ketan Mukhija, senior partner at Burgeon Law, mandatory disclosures on stock exchanges could enhance market transparency and aid more efficient price discovery for ESG-linked instruments. Experts also expect the circular to reshape ERP business models, pushing firms to reevaluate revenue strategies and compliance structures. Ladha said stricter transparency and conflict-of-interest norms could undermine the viability of the subscriber-pays model unless ERPs adapt. According to Tyagi, while these changes reduce public-facing obligations for subscriber-based ERPs, they may increase internal coordination and systemisation costs. Issuer-pays ERPs, meanwhile, must continue with full public disclosures and prepare for enhanced governance and audit requirements. Sebi granted Category II ERPs—a classification typically covering newer or smaller firms—a two-year extension before compliance with mandatory internal audits and governance committee formations kicks in. The relaxation of governance norms for Category-II ERPs 'may offer some relief, but smaller players may still struggle with capacity and compliance burdens", Mukhija said. The regulator has also expanded the pool of eligible auditors to include cost accountants and professionals with information systems security credentials. Despite initial challenges, experts are hopeful that the regulatory changes will enhance ESG rating credibility and support capital allocation into ESG-linked instruments. 'Improved visibility and transparency of ESG scores on stock exchanges will aid efficient price discovery and bolster investor confidence," said Jyoti Prakash Gadia, managing director at financial advisory firm Resurgent India. 'The changes are pragmatic, not disruptive, and will contribute to the long-term credibility of the ecosystem." The long-term impact will likely foster broader market acceptance and increased use of ESG ratings in investment decisions, experts said. Tyagi believes the reforms will bring India's ESG framework closer to global benchmarks, facilitating greater institutional interest. 'For corporates, the clarity in rating assignment, withdrawal, and disclosure norms means better planning and predictability in ESG engagement."
