Business
AIFs seek status quo as ‘foreign control’ rules go for a recast
Commonly called alternative investment funds (AIFs), these local fund houses, which have emerged as significant sources of risk capital, made a strong appeal at a meeting about a fortnight ago with senior officials of the Securities and Exchange Board of India (SEBI), Reserve Bank of India (RBI) and ministry of finance, two persons familiar with the discussions told ET.
At stake is the future of the fast-growing AIF industry which has been pooling in money for over a decade from local and offshore investors to bankroll unlisted firms, startups and expanding businesses.
Their concern and the urgent plea requesting a status quo on regulations, stems from the draft FEMA (Foreign Investment) Rules 2026. The draft, released by RBI on July 21, 2026, gives regulators the scope to change the parameters that qualify an AIF as ‘foreign controlled’. Currently, an AIF with almost all offshore investors is regarded as a domestic entity if its sponsor and investment manager are Indian owned and controlled.
As SEBI and RBI had expressed before, such a rule opens the door to regulatory arbitrage: a foreign investor barred from ownership or control in sensitive industries puts money in an AIF (backed by Indian sponsor and manager) to indirectly acquire equity stake in companies operating in sectors having foreign direct investment (FDI) restrictions.
After the draft July guidelines, AIFs fear that a relook at the ‘foreign ownership and control’ definition to curb such indirect ownership would mean that even AIFs with Indian managers and sponsors would be considered as foreign entities if majority of the fund corpus is contributed by foreign investors. Once categorised as foreign entities, such AIFs would run into investment restrictions and formalities applicable to foreign direct investors.
With non-residents accounting for 40% of AIF investments, the draft rules have rattled the industry, as ET had reported on August 11.”At the meeting, the AIF lobby tried to put across the point that the India story can be best sold by Indian managers. They are best positioned to canvass for capital from various markets — a strategy that has worked in the last 10 years. The industry said that if the government intends to liberalise foreign investments, such a change could slow down inflows,” said a person who attended the meeting.
In fact, AIFs have even asked for a carve out in the existing regulation so that funds whose sponsors and managers are owned and controlled by listed Indian financial institutions should be treated as domestic AIFs even if more than 50% equity of these institutions is with foreign persons. “Private banks and NBFCs are regulated and registered with RBI. As long as they are listed, AIFs backed by them should be considered domestic. AIFs have asked for simplification of rules related to ultimate beneficial ownership,” said a source.
The regulatory and ministry officials neither raised the issue of regulatory arbitrage nor reacted to the points made by AIF industry officials whose views on the draft norms were sought. The concerns over regulatory arbitrage was first captured in a note placed before SEBI board in May 2024. Besides AIFs’ ‘indirect ownership from downstream investment’, it said, “..there is scope that the investments could flow from our land border sharing countries through AIFs in companies beyond the permissible limit for automatic route under FDI policy, undermining the spirit of Press Note 3 notification and the steps taken by Government of India in this regard.”
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NSDL and CDSL together added nearly 3.27 million demat accounts in August, the highest monthly addition since January 2026. The total number of demat accounts stood at 237.7 million at the end of the month.
ET BureauThe figure does not represent the number of unique investors, as individuals can hold multiple demat accounts. The number of unique investors is estimated at around 135 million.
“Buoyancy in IPO markets is one of the reasons for the sharp jump in new demat accounts. Strong small- and midcaps have also raised investor return expectations from IPO debuts,” said Sriram Velayudhan, senior VP, IIFL Capital Services.
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The pickup came amid weakness in the benchmark indices, with the Sensex falling 1.5% and the Nifty declining 1.2% in August. However, segments of the market that tend to see stronger retail participation remained buoyant. The BSE MidCap 150 gained 1.6%, the BSE SmallCap 250 rose 2.4% and the BSE Microcap 250 jumped 6.2% during the month.
Robust primary market activity was a key factor driving new account additions, experts said. August was the busiest month for IPO and offer-for-sale (OFS) activity in 2026, with 23 IPOs raising ₹22,448 crore and two OFS transactions raising ₹31,660 crore.
With Jio and NSE expected to launch their IPOs in the coming months, market participants expect the pace of demat additions to pick up further.
An Amazon Air cargo plane overshot the runway while attempting to land at Miami International Airport, killing five people and seriously injuring five more.
The Boeing 767-300 cargo aircraft crashed just before 14:00 local time (19:00 GMT) after departing from Luis Muñoz Marín International Airport in San Juan, Puerto Rico. The flight also hit several vehicles on the ground.
Amazon said that it is “working closely with local authorities and officials to understand exactly what happened”.
All flights were ordered grounded by the Federal Aviation Administration (FAA) as fire crews raced to the smoking crash site. The crash comes over Labor Day weekend, one of the busiest travel times of the year.
“At least five people have lost their lives, and five others are injured,” Miami-Dade County Mayor Daniella Levine Cava said at a news conference on Sunday evening.
She added that rescue crews arrived at the scene within “seconds” of the crash.
“Right now, our focus is on the families, those who were injured, and the ongoing response,” she continued.
Three of the five people injured are in critical condition, said Miami Fire Chief Raied Jadallah. The mayor said they were all taken to hospital with “unknown injuries”.
Several of the injured were trapped inside or under vehicles on the ground, and needed to be extricated by fire and rescue crews, said Jadallah.
Officials say it is too early to know the cause of the crash, and that it will be investigated by the National Transportation Safety Board. The federal agency, which investigates all air crashes in the US, plans to hold a news conference on Monday.
The Amazon flight operated by 21 Air, a charter company based in North Carolina, “overran Miami International Airport’s diagonal runway and is disabled at the northwest end of the airport,” the airport said in a statement.
Miami Dade Fire Rescue said crews “arrived to find an airplane that had caught on fire as a result of this crash, with heavy flames and smoke showing”.
The billionaire Stokes family has regained control of the merged Southern Cross Media Group, with Ryan Stokes appointed chair seven months after his father stepped down.
The chief executive of SGH has been selected as non-executive chair, effective immediately, after previously being appointed a board member in the merger.
It comes seven months after his billionaire father, Kerry Stokes, parted ways as chair in February, briefly handing over to Heith Mackay-Cruise before the latter stood down.
Now former chair Teresa Dyson had been holding down the role but will now chair a new risk, regulatory and compliance committee.
More to come…
The mainboard IPOs lined up for the week from September 7 to 11 are Pranav Constructions, Glass Wall Systems India, Prasol Chemicals, Kanohar Electricals, Manipal Payment & Identity Solutions, Steamhouse India, LCC Projects, Karamtara Engineering, Rentomojo, Asset Reconstruction Co India, Veegaland Developers and Manika Plastech.
ET BureauIn the SME segment, Apana Logistics, Infrax Renewable, Vinod Texworld and Amtech Esters will launch their IPOs.
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IPO fundraising has remained robust so far in September, with 14 mainboard issues raising around ₹7,640 crore. This follows a strong August, when 23 mainboard IPOs raised around ₹22,456 crore. In the SME segment, seven IPOs have raised ₹260 crore so far in September, compared with 23 issues that raised around ₹1,159 crore in August.
Calamos Investments is a diversified global investment firm offering innovative investment strategies including U.S. growth equity, global equity, convertible, multi-asset and alternatives. The firm offers strategies through separately managed portfolios, mutual funds, closed-end funds, private funds, an exchange traded fund and UCITS funds. Clients include major corporations, pension funds, endowments, foundations and individuals, as well as the financial advisors and consultants who serve them. Headquartered in the Chicago metropolitan area, the firm also has offices in London, New York and San Francisco. For more information, please visit www.calamos.com.
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