A corporate conglomerate’s unlisted firms may soon be subject to disclosure obligations, according to capital markets regulator Sebi.
While full disclosure standards are applied to listed firms, unlisted corporations are not subject to the same levels of disclosure obligations.
“There is a need to identify, monitor, and manage risks introduced into the securities market ecosystem by unlisted companies in a conglomerate with a complex set of listed and unlisted associates,” Sebi said in its annual report for 2022–2023.
The regulator also intends to improve transaction reporting at the group level in order to promote openness around the business.
The annual report highlighted that Sebi will investigate to be revealed on an annual basis the details of cross-holding and significant financial transactions inside the group.
Top business conglomerates in the nation include the Bajaj Group, Aditya Birla Group, Adani Group, Tata Group, and Reliance Industries.
The regulator also intends to evaluate the requirements for introducing stocks in the derivatives category.
Only if the underlying securities meet certain requirements may derivatives contracts on scrips be traded on recognized stock exchanges.
The qualifying requirements for the inclusion of stocks in derivatives underwent their most recent revision in 2018. Broad market indicators of the size and liquidity of the cash market, such as market capitalization and turnover, have increased significantly since that time.
In light of this, Sebi advocated reviewing the requirements for the launch and continuance of stocks in the derivatives section.
The capital markets regulator is now enhancing the current framework of price band for these scrips and related derivatives contracts in order to increase volatility management and minimize information asymmetry for scrips and contracts in the equities derivatives sector.
The new structure would lessen the effects of any potential pricing risk brought on by abrupt, excessive market volatility, fat finger mistakes, or problems with a trading member’s systems.
Derivative contracts on scrips have a dynamic price range that applies to both the scrips and the derivative contracts in question. These price ranges may be flexible depending on the scrip’s trading activity and other factors.
Sebi intends to evaluate the pricing structure in the event of delisting, among other things. In particular, a review of the reverse book-building procedure would be done, and additional options would be investigated to establish the exit price in the event of a voluntary delisting.
The regulator also intends to evaluate the stock exchange’s mechanism for mandatory delisting.