SEBI proposes enhanced disclosure rules for unlisted companies

The Securities and Exchange Board of India (Sebi) is considering the implementation of stricter disclosure requirements for unlisted companies operating within business conglomerates. While listed companies adhere to robust disclosure regulations, similar standards are not currently imposed on their unlisted counterparts.

In its annual report for the fiscal year 2022-23, Sebi emphasised the need to manage and oversee potential risks stemming from unlisted companies within complex conglomerates. The proposed measures aim to foster transparency and accountability within these diversified entities.

Sebi intends to bolster transparency by backing group-level reporting for transactions, ensuring that details of cross-holdings and significant financial dealings within conglomerates are disclosed annually. This initiative is part of Sebi's broader strategy to harmonise disclosure standards and prevent information asymmetry.

Regulatory radar

Prominent Indian business conglomerates, including Tata Group, Reliance Industries, Adani Group, Aditya Birla Group, and Bajaj Group, are under the regulatory radar as Sebi seeks to tighten regulatory oversight.

Moreover, Sebi is set to review the criteria for introducing stocks into the derivatives segment. The current criteria, last revised in 2018, are being reconsidered due to substantial changes in market dynamics, such as increased market capitalisation and trading volumes.

To enhance volatility management and counter information imbalances in equity derivatives, Sebi is enhancing the pricing framework for derivative contracts. The proposed framework aims to mitigate potential risks arising from extreme market volatility, operational errors, or technical glitches.

Additionally, Sebi plans to reevaluate the pricing mechanism for delisting stocks. This includes a comprehensive review of the reverse book-building process and exploring alternative methods to determine exit prices during voluntary delistings.

The capital market regulator also intends to assess the existing framework for compulsory delistings on stock exchanges. This multi-pronged approach signifies Sebi's commitment to modernising market practices and ensuring fairness across all segments.

(With Reuters inputs)