Domestic institutions have lately attracted a lot of criticism for jostling with retail investors to bid in over-priced Initial Public Offers (IPOs), in India’s super-heated primary market. Therefore, it is surprising that mutual funds should want to dabble in an even riskier segment — shares in unlisted firms.

Securities and Exchange Board of India (SEBI) has recently asked mutual funds to desist from investing in private share placements from unlisted companies. SEBI has drawn attention to Clause 11 of the Seventh Schedule of the SEBI (Mutual Funds) Regulations, 1996, which mandates that all investments by MFs in equity shares must be made only in listed securities or ‘to be listed’ securities. Some mutual funds seem to have interpreted the “to be listed” part liberally, to buy up share

See Full Page