Investment By Trust
Arcil generally acquire financial asset from banks through SPV(Special Purpose Vehicle) in form of a trust. The SPV funds its acquisition by issuing SRs to QIB investors.
Security Receipt means a receipt or other security, issued by a securitisation company or reconstruction company to any qualified institutional buyer pursuant to a scheme, evidencing the purchase or acquisition by the holder thereof, of an undivided right title or interest in the financial asset involved in securitisation. SRs shall be redeemed only out of realization from financial assets held under the Trust and carry no fixed returns. SRs may also be sold in the secondary market.
The SRs issued by SC/RC are predominantly backed by financial assets and cannot be characterized either as a debt or an equity instrument, since they combine the features of both.However, these are recognized as securities under Securities Contracts (Regulation) Act, 1956.The investment in SRs is restricted to Qualified Institutional Buyers (QIBs) only.
Securitisation Company or Reconstruction Company shall invest in the Security Receipts issued by the trust set up for the purpose of securitisation, an amount not less than 15% (previously 5%) under each scheme.
Qualified Institutional Buyer (QIB)– A qualified institutional buyer means a financial institution, insurance company, bank, state financial corporation, state industrial development corporation , trustee or a securitization company or a reconstruction company registered with RBI, asset management company making investment on behalf of mutual fund or a foreign institutional investor registered under SEBI or any other body corporate as may be specified by SEBI.
Foreign Investment in SRs - The limit of Foreign Institutional Investment (FII) investment in SRs has been enhanced from 49% to 74% of the paid up value of each tranche of scheme of Security Receipts issued by the SC/RC.
Further, the individual limit of 10% for investment of a single FII in each tranche of SRs issued by ARCs has been dispensed with