Sebi’s investment cap on Temasek, GSIC upsets parent Singapore govt

City-State Says Ruling Limiting Combined Investment To 15% Violates Trade Pact

 THE Singapore government has told India's foreign ministry that a ruling by the Securities and Exchange Board of India (Sebi) restricting investments by two of its overseas investment arms — Temasek Holdings and the Government of Singapore Investment Corporation (GSIC) — to a combined 15% violates the Comprehensive Economic Co-operation Agreement (CECA) signed by the two nations.
    The Singapore government says that both Temasek and GSIC are two distinct entities and that the decision of India's securities market regulator Sebi to limit acquisitions by overseas entities in listed firms, to less than 15% should not apply to them. Sebi's foreign portfolio investment rules restrict investment by a single foreign fund to 10% in a listed Indian firm.
    The Indian regulator classifies different foreign institutional investors (FIIs) who have common ownership as one FII group and caps their investment at 10%. The Singapore government is the common owner of both companies but the Comprehensive Economic Co-operation Agreement treats them as different entities. The Singapore government, therefore, says that both firms are entitled to purchase up to 10% or the prevailing threshold under Sebi regulations of the issued capital of any company, according to the contents of a letter addressed to the government and seen by ET.
    The Singapore government's communication to the Indian government comes in the wake of a letter from Sebi to GSIC on the rules relating to investment by foreign portfolio investors or foreign funds. Sebi had told the two firms in July this year that they should not jointly exceed the trigger limit of 14.99% specified in the regulator's rules on takeovers. Both Temasek and GSIC were then advised by Sebi to appoint a single lead custodian to ensure reporting of investment data to Sebi and the RBI.
    The letter written by Singapore's ministry of foreign affairs to the Indian government says that both governments had agreed that GSIC and Temasek would be treated as independent and unrelated legal entities for the purposes of application of Sebi legislation. The Singapore government has also said that it has advised Temasek and GSIC that they can't jointly be subject to any limit under Sebi regulations, including the 15% limit and neither should the two entities be obliged to appoint a single lead custodian as advised by the Indian regulator.
    Manish Kejriwal, the head of Temasek's operations in India, declined to comment on the issue. The ministry of commerce and industry, the nodal agency for all bilateral agreements, has now sought comments on the matter from the finance ministry. According to a Sebi official, the Indian regulators' stand was that both the entities should not be treated as separate entities as they are related entities. "They should appoint a single custodian for reporting purpose."
    Singapore has also stated that shares acquired, or sought to be acquired, by GSIC and Temasek shall not be regarded as being under a common ownership and neither shall the two firms be deemed to be parties acting in concert. This is not the first time that Temasek and GSIC investments in Indian companies has become controversial.