Moving beyond the vanilla equity and derivative products, Indian capital market is set to offer a host of new investment avenues in coming months with the Securities and Exchange Board of India (Sebi) expecting a sizeable number of REITs (real estate investment trusts) and start-up listings to hit the market in the next fiscal year.
Market regulator Sebi is also gearing up for significant steps to deepen the corporate bond market to develop a market-based financing framework for companies, while it also expects instruments like ‘muni’ bonds and infrastructure investment trusts (InVITs) to get a leg-up in financial year 2016-17, beginning April 1.
Sebi has also put in place a new regulatory framework for the municipal bonds, commonly known as ‘muni’ bonds which are very popular in various developed markets as an instrument to raise funds.
The regulator expects the government’s ambitious smart cities programme to get a major boost from the issuance of muni bonds as the local bodies can tap the capital markets with these instruments to garner the required funds for building infrastructure and for providing other facilities.
Besides, Sebi is working on an electronic auction platform for primary offering of corporate debt, and also a complete information repository for corporate bonds, covering both primary and secondary market segments, as proposed in the Union Budget by Finance Minister Arun Jaitley.
For deepening of corporate debt market, Mr Jaitley had also announced that the Reserve Bank of India (RBI) will issue guidelines to encourage large borrowers to access a certain portion of their financing needs through market mechanism instead of the banks.
Sebi expects this move, in addition to its own regulatory measures, to give a significant boost to the bond market.
“There are several developmental measures we have taken for the markets – One is the area of REITs (real estate investment trusts) and InVITs.”
“With recent Budget announcements and based on my interaction with the industry, I am hopeful that during 2016-17, we will see a sizeable number of REITs coming up,” Sebi Chairman U K Sinha said recently here after the first post-Budget board meeting of the capital markets regulator.
Last week, Sebi also allowed foreign portfolio investors to invest in REITs and InVITs.
Mr Sinha said Sebi has also put in place new norms for listing of start-ups, with easier disclosure compliance requirements along with various other relaxations, which coupled with the sops announced by the government would result in many such ventures hitting the market.
“I am hopeful that those (start-up) listings would happen in the new year,” he said.
“We have also come out with norms for municipal bonds. We all know that there would be smart cities and otherwise also there are municipalities and they can issue these bonds.”
“Now, there is a Budget announcement on corporate bonds and RBI is going to incentivise the corporate bonds that is for corporates planning to raise funds through bonds rather than from the banks… This is a government policy now that from banks-based financing, the country has to move to market-based financing. These are some of the proactive measures,” he added.