India’s projected economic growth momentum needs vibrant capital market:SEBI Chairman

फाइल

Chairman Ajay Tyagi's Speech at the 9th Financial Markets Summit of CII-

CII’s 9th Financial Markets Summit
“Innovation, Reforms & Adoption - Key to financing growth through Financial Markets”
Hotel Taj Vivanta President - Cuffe Parade - Mumbai
December 7, 2018 – 10:00 a.m.
Introductory Remarks
1. Ladies and Gentlemen, it gives me great pleasure to be present amidst you at the 9th Financial Market Summit of the Confederation of Indian Industry (CII). I thank the organizers for inviting me to deliver the inaugural address.
Current Market Scenario
2. Globally, capital markets have been quite volatile during the current year and are likely to remain so in coming times on account of various factors. These factors include uncertainty in oil prices; move towards normalization of monetary policies by central banks across jurisdictions, especially policy stance of US Fed; US-China trade dispute; and geo political risks.

3. These factors have also affected the Indian markets. As for domestic issues, NBFCs and HFCs have been facing tight liquidity since September 2018; though much has improved on account of various steps taken by RBI in providing systemic liquidity. Of course, the biggest bonanza for the Indian economy has been fall of about 30% in crude oil prices in the last one month. The macros of the economy have much improved since then.
4. The performance of Indian capital market compares favorably with the other major global economies on various parameters such as indices returns, volatility and currency movements. During the April to November period this year –
 Return of NIFTY has moved up by about 6.5%; though trailing the return of Dow Jones (8%), it is higher than the return of stock indices of other countries such as UK (- 1%), China (- 18%), Brazil (5.7%) and Japan (4.5%).
 The volatility in Indian equity market at 12% is among the lowest compared to major developed and emerging markets like UK (12%), US (16%), China (19%), Japan (17%), South Korea (14%), Hong Kong (19%) and Brazil (21%).

 Indian rupee saw a depreciation of around - 7% against the US Dollar, which is around the same level as the depreciation in the Japanese Yen (- 7.3%) but better than many other jurisdictions like China (- 10.81%), UK (- 10.10%), Europe (- 8.73%) and Brazil (- 16.85%).
Role of Capital Markets in supplementing Growth
5. Let me now dwell upon the role of capital markets in ably supplementing the growth of Indian economy by providing much needed funds to the corporate sector in a challenging credit environment.
6. Capital market, both debt and equity, has become increasingly important for India’s growth story. A record amount of Rs. 8.8 trillion was raised from Indian capital market during 2017-18 (through equity and debt) against the Rs. 7.7 trillion raised during 2016-17. Rs. 4.85 trillion has already been raised during the current financial year.

7. During FY17, fund raised from corporate bond market touched an all-time high of more than Rs. 6,70,000 Crores, surpassing the amount of bank credit disbursed during the same year. During FY18, about Rs. 6,05,000 Crores was raised. An amount of more than Rs. 3,16,000 Crores has already been raised as of November end this financial year.
8. The development of other alternate sources of funding like AIFs, REITs, InvITs and Municipal Bonds has also been gradually gaining prominence over time.
9. AIFs, today, are playing a vital role in providing alternate mode of financing to the economy. As of September 2018, a total of 476 AIFs are registered with SEBI with ‘cumulative commitment raised’ of around Rs. 2 Lakh Crores since 2013 and ‘total funds raised’ of more than Rs. 1 Lakh Crores for the same period. There has been a spurt in AIF activities in the past 2 / 3 years, with ‘cumulative commitment raised’ going up by 117 % from March 2016 to March 2017 and further 96 % from March 2017 to March 2018. For the same periods, the ‘total funds raised’ have gone up by 80 % and 108 % respectively.

10. REITs and InvITs are another set of fund raising vehicles. Changes made to the regulatory and tax framework for these instruments over the last 2-3 years are likely to show positive results going forward. 7 InvITs and 2 REITs have so far been registered with SEBI. 3 of the registered InvITs have already issued and listed more than Rs. 10,000 crores of units. Recently, one REIT has filed documents with SEBI to make an offering of more than Rs. 5,000 crores of units.
11. An active municipal bond market would help municipalities to finance a part of their requirement through the financial market. Pursuant to SEBI’s Municipal Bond framework of 2015 which was further amended in 2017, 2 municipal corporations - Pune and Greater Hyderabad - have together raised Rs. 400 crore though issuance of municipal bonds during 2017-18 and 3 municipal corporations - Indore, Greater Hyderabad and Bhopal - have together raised Rs. 470 crores so far during the current financial year. The data, however, suggests that our municipal bond market is still at a very nascent stage.
12. SEBI is in touch with market participants and if any further changes are warranted in the regulations relating to REITs, InvITs, or municipal bonds, appropriate action would be taken accordingly.

Some recent SEBI Initiatives
13. Let me now discuss some of the important initiatives taken by SEBI recently to facilitate growth in capital markets.
Rationalization of Processes
14. In order to reduce the time involved in issuance process and to reduce overall cost of fund raising, SEBI is working out a framework where it would be possible to list an issue on T+3 basis i.e. listing within 3 days after an issue closes. As for the processing of IPO documents by SEBI, the average time for the same has reduced from 78 days to less than 60 days during the last 2 years.
Further deepening of Corporate Bond Market
15. Some significant measures taken recently by SEBI to further deepen the corporate bond market include:
i. Easing the process for public issuance of corporate bonds, in terms of reduction in mandatory costs and reduction of timelines from issuance to listing.

ii. Nudging large corporates with “AA” rating and above to access 25% of their incremental borrowings from the bond market.
iii. Operationalizing corporate repo platform on stock exchanges.
Review of Regulations on Corporate Restructuring
16. Based on inputs received from various stakeholders and through wider consultations, SEBI reviewed the regulations governing aspects relating to ICDR, SAST, Buyback and Delisting regulations. The recent changes to ICDR regulations, inter alia, include rationalization of disclosure requirement, rationalized definition of promoter group and aspects which would further enhance overall ease of doing business.
Corporate Governance
17. Taking into consideration the recommendations of Kotak Committee, along with public comments thereon, SEBI has taken several decisions on measures to further improve the corporate governance in India.

18. For instance, SEBI, inter alia, enhanced the focus on independent directors, prescribed separation of CEO/ MD and Chairperson; enhanced role of Audit Committee, Nomination and Remuneration Committee and Risk Management Committee; strengthened approval and disclosure of related party transactions (RPTs); mandated consolidated quarterly results and secretarial audit for listed entities and their material unlisted subsidiaries.
Framework for Direct Listing
19. The extant legal framework in India, hitherto, does not permit direct listing of Indian companies on foreign stock exchanges and vice versa. An Expert Committee constituted by SEBI on this aspect has recently submitted its Report to SEBI, which is on SEBI’s website for public comments.
20. With so many Captains of the industry present today in this Forum, let me take this opportunity to encourage you to peruse the Report diligently and offer your comments within the specified time-frame.

21. Let me conclude by reiterating that a vibrant capital market has to play an increasingly pivotal role to facilitate fund mobilization for sustaining India’s projected economic growth momentum. This role becomes even more important, given the stress on the banking sector.

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