India's market regulator is set to simplify disclosure requirements for offshore funds to attract more long-term foreign investment. According to reports from The Hindu BusinessLine, three sources with knowledge of the matter confirmed that SEBI is considering easing disclosure norms for high-risk offshore funds after rules introduced during SEBI's scrutiny of Adani led to complaints and legal challenges. The proposed adjustments would address what investors say were unintended consequences of the 2023 rules that were meant to prevent funds from holding concentrated investments in Indian companies. As per The Hindu BusinessLine, there is a concentrated effort to ease pain points and attract long-term foreign capital. The timing is particularly sensitive as foreign portfolio investors have sold a record $26.88 billion so far in 2026, according to The Economic Times.
The proposed changes would address what investors say were unintended consequences of the 2023 rules that were meant to prevent funds from holding concentrated investments in Indian companies. As reported by The Hindu BusinessLine, the category of 'high risk' was defined as funds that hold more than 50% of their Indian assets in a single group of companies. The threshold triggered appeals from investor associations in Asia and the U.S. and legal challenges from several offshore funds, prompting a regulatory review. The rules can clash with how many funds actually operate, as early positions are often concentrated before a portfolio broadens, making immediate reporting costly and legally messy. According to The Hindu BusinessLine, Generation Investment Management argued in a January appeal that a new strategy can begin with 100% in one stock, meaning the 'high-risk' label can bite before a fund has time to diversify.
According to The Hindu BusinessLine, SEBI is examining three key proposals: exempting funds that have only recently begun investing in India from disclosure requirements for 6-12 months, raising the threshold at which investor details must be reported, and expanding the list of countries and regulators eligible for exemptions. The sources confirmed that discussions are being held internally, after which SEBI will submit recommendations to a panel with external members before seeking public feedback. As reported by The Hindu BusinessLine, if SEBI gives new funds more time, raises the trigger, and broadens exemptions, it lowers compliance and legal risk for offshore managers, potentially helping keep some foreign capital engaged in India's market.
At least two funds have challenged SEBI's regulations, with court filings showing that Generation Investment Management, the sustainability-focused investment firm co-founded by former U.S. Vice President Al Gore and former Goldman Sachs Asset Management CEO David Blood, is facing disclosure requirements on planned new investments. The asset manager, which manages $25 billion and has $833 million in assets in India, filed an appeal in January arguing that its funds typically identify one stock when beginning investments, which would mean 100% of its Indian assets are invested in one company. As reported by The Hindu BusinessLine, the fund stated that 'discretionary decision making is impaired by the ongoing compliance requirement'. A second case was filed in January by Thailand-listed seafood producer Thai Union Group PCL, which invested in only one Indian company from 2008 to 2009 and chose to exit part of its investment in 2025 due to compliance difficulties. The fund is seeking a waiver of a 5% penalty levied by SEBI for failing to disclose investors, arguing that its wide shareholding structure made compliance practically impossible, with its parent company having more than 50,000 publicly traded shareholders.
The proposed changes come as foreign portfolio investors have sold a record $26.88 billion so far in 2026, according to The Economic Times. The expanded exemptions will give funds more time to disclose investors, making it easier for thematic funds to invest in India at a time when foreign capital is flowing out. As reported by The Hindu BusinessLine, disclosure rules don't just add paperwork; they can change who's willing to take the first, concentrated step into Indian equities. The timing is sensitive as SEBI is trying to reduce friction without abandoning transparency, particularly for single-name or single-group exposures that often provide early liquidity when flows are already running negative.
