By Television Mohandas Pai & Sunil Sanghai
Marching powerful into 2021 is a consequence and amalgamation of the many events that composed the year that went by. The Covid-19 pandemic—an unexpected international crisis, a as soon as in a century event—shook, rattled, and disrupted the international economy in 2020. Governments and regulators worldwide had been faced with a predicament that needed swift policy responses, and our personal Indian government and regulators certainly responded with immense alacrity to alleviate the crisis!
In a flashback, by March 2020, with the pandemic enveloping most of the globe, all financial activity had come to a grinding halt. Beyond the wildest expectations! Mounting worries on the outbreak rapidly percolated into the capital markets resulting in a sharp decline of 23.1% in the benchmark NIFTY index in March 2020, against the international downfall of 13.8%, 10.5% and 9.7% in FTSE, NIKKIE and HANG SENG indices, respectively. With the uncertainty and panic, there was no getting demand in the Indian capital industry, and alternatively, an immense promoting stress.
In the backdrop of such a deteriorating and alarming predicament, industry regulator Sebi responded really promptly, proactively, and effectively. A actually outstanding work to make certain the smooth functioning of the capital markets, to provide substantial alternatives to issuers to raise capital and to shield the investors. Even throughout the lockdown, the Sebi group continued to operate seamlessly, day following day in complete spirit, to guard the markets and resolve for all the bottlenecks—even risking their personal overall health! Truly a stupendous endeavour. We, as members of society and as practitioners in the capital markets, have to acknowledge the gratitude we owe to our government and our regulators.
A model illustration of the mounting stress on Sebi was witnessed at the onset of the pandemic when evaporating liquidity in the capital markets resulted in Sebi acquiring requests from many organisations, to shut down the stock exchanges or minimize trading hours. However, Sebi exhibited leadership and proactiveness by sustaining continuity and liquidity in the industry to allow a broad-primarily based recovery.
The industry regulator implemented a slew of proactive measures towards relaxation in regulatory compliance, ease of fundraising and improvement of the corporate debt industry. The initiatives incorporated an extension of the deadline for filings to stock exchanges, a single-time relaxation in key industry fundraising norms, relaxation of the eligibility criteria for issuances, quickly-tracking of issuances, rationalisation of disclosures, new guidelines on margin pledge and relaxation of the minimum subscription needs, amongst other folks. Apart from the help to listed entities, Sebi also offered relaxation for industry intermediaries such as stockbrokers, depository participants and share transfer agents (RTAs). It is noteworthy, that throughout the industry adversity, Sebi issued more than 40 measures to cushion the effect of the pandemic and allow smooth and uninterrupted functioning of the country’s capital markets.
Sebi’s proactive initiatives and policy help had a positive impact and facilitated Indian corporations to raise record-higher capital in 2020, defying disruptions brought on by Covid-19 and financial slowdown. Fundraising by means of public equity markets was at a record of Rs 1.7 trillion in 2020, an raise of 116% compared to 2019. The key industry witnessed 15 principal-board IPOs, which collectively raised Rs 26,611 cr in 2020, up 115% compared to Rs 12,362 cr in 2019. Mobilisation of sources by means of rights troubles was also at a record higher in 2020 with 20 corporations raising Rs 64,984 cr, up 25% from Rs 52,053 cr in 2019. The markets witnessed revolutionary structures such as InvITs and ReITs raising a record of Rs 29,715 cr, an raise of 271% compared to 2019. A particular callout and testimony of Sebi’s supportive work had been the biggest ever rights situation of shares in a ‘fast track’ mode, executed at the peak of the pandemic in June 2020.
It is commendable that not only did Sebi hold the reins tight when needed, but as the nation witnessed unlocking, the industry regulator was affordable sufficient to phase out the measures earlier adopted to ease compliance and curb volatility. It steadily brought normalcy back to the markets. To place it in point of view, Sebi’s reluctance to extend the new margins norms might be noteworthy.
It is laudable that Sebi managed this swift turnaround so proficiently, by taking an inclusive and consultative method by reaching out to industry participants and many committees, which includes the Primary Market Advisory Committee (PMAC), to type a cohesive view on many adjustments. This mixture of proactive and consultative method enabled the capital industry to ride the higher tide of the pandemic smoothly. Sebi, as the industry regulator, set its vision higher and strategically intervened to streamline processes. It is befitting to compliment the leadership of SEBI and its employees, which effectively managed to retain continuity and normalcy at a time when all eyes had been on the capital market—the barometer of the Indian economy.
We have to applaud the Sebi group for its help and proactive method throughout these difficult instances. The whole organisation rose to the occasion, offered fantastic leadership, intervened with proper policy responses, ensured higher access to capital, and created positive that the capital markets functioned effectively and completely!
Pai is chairman, Aarin Capital Partners and Sanghai is founder & CEO, NovaDhruva Capital. Views are private