India’s debut issuance of sovereign green bonds by auction provides a significant opportunity to ascertain the current market appetite for such sustainability-linked initiatives, including among institutional investors. Indeed, such bonds have been successful in the past in the context of an eclectic set of sovereign issuances. Among other things, standards established by such issuance may lead to welcome improvements in the Indian bond market in general terms. For instance, Indian companies may want to ride on enhanced credibility standards, as applicable, and seek to better address persistent concerns related to greenwashing. Such broad advantages notwithstanding, in this piece, we look at some of the finer details related to India’s debut sovereign green bond issuance.
Tag: Banking and Finance
How Green is Your Money? Capitalizing on Indian Renewables
Consistent with India’s ambitious climate-related targets, significant investments are being made in the domestic renewable energy sector, driven largely by private sector activity. Acquisitions and bonds represent a large portion of this capital, along with foreign equity, traditional loans, and mezzanine financing. Enabled by an encouraging FDI regime as well as locally-targeted regulatory schemes – such as incentives introduced by the government to bolster domestic capacity and manufacturing – self-sufficiency and foreign capital now constitute an integrated ecosystem. Along with conventional means of financing, newer frameworks such as infrastructure investment trusts specifically set up in the renewables space could be better explored in the future, especially in light of the urgency with which India needs to catch up towards its climate targets. Legislative changes in respect of the power markets – such as those related to trading in renewable energy certificates (RECs) – may also be curated by appropriate regulatory bodies to expand upon existing revenue streams.
New Overseas Investments Regime in India
On August 22, 2022, the Government of India notified the new regime for overseas investments by Indian entities and individuals. The new regime is a mixed bag of liberalizations, new restrictions and clarifications, and signals the revised thinking of the Reserve Bank of India in certain respects, particularly in relation to the scope of overseas investments and round tripping. This note discusses the changes introduced by the new regime and its impact on cross border transactions.
Pre-pack Resolution Route Needs Incentives
The recent amendment to the Insolvency and Bankruptcy Code, 2016 (“IBC”) replaces an ordinance promulgated earlier this year, and provides for a pre-packaged insolvency resolution process (“PIRP”) for micro, small and medium enterprises (“MSMEs”). The PIRP comes in the backdrop of the financial stress caused by COVID-19 and aims to cause minimal disruption to business and to ensure job preservation. While the PIRP is well intended, how effective it will be in resolving stress on corporate debtors in the MSME sector will come down to how it is implemented and if required, fine tuning its design.
Does the Prevention of Money Laundering Act, 2002 Safeguard Third-party Rights in the Course of Attachment of Properties?
A key feature of the Prevention of Money Laundering Act, 2002 (the “Act”) is the power of the investigating agency under the Act, i.e., the Directorate of Enforcement (the “ED”), to provisionally attach any property believed to be involved in money laundering for an initial period up to 180 days from the date of such attachment. This provision ensures that proceeds that are obtained directly or indirectly from the offences noted under the Act (“scheduled offences”) are not dealt with in any manner so as to frustrate proceedings relating to the confiscation of such proceeds under the Act. Ex facie, this provision appears to be in direct conflict with the rights of bona fide third-parties such as banks, mortgagees, transferee, and lessee etc. who may otherwise have a lawful interest in a property alleged to be involved in money laundering and had no knowledge of such involvement at the time of acquisition of interest in such property. In light of this apparent conflict, does the Act adequately safeguard the rights of such third-parties who have a lawful interest in a property provisionally attached by the ED?
Residuary Jurisdiction of the National Company Law Tribunal under Section 60(5) of the Insolvency and Bankruptcy Code, 2016: A Brief Analysis
Pursuant to Section 60(5) of the Insolvency and Bankruptcy Code, 2016 the National Company Law Tribunal is bestowed with wide jurisdiction to decide: (i) ‘any’ application or proceeding against a corporate debtor; (ii) ‘any’ claim made by or against a corporate debtor including claims by or against its subsidiaries; and (iii) ‘any’ questions of priority or ‘any’ question of law or facts, arising out of or in relation to insolvency resolution or liquidation proceedings of the corporate debtor. Are there any limits to such jurisdiction of the National Company Law Tribunal?
Case Note: Judgement of the Supreme Court in the Essar Steel Case
By a judgment dated November 15, 2019, the Supreme Court of India in the case of Committee of Creditors of Essar Steel India Limited v. Satish Kumar Gupta and Others delivered its final verdict on the acquisition of Essar Steel India Limited under the Insolvency and Bankruptcy Code, 2016. The proceedings under the IBC in relation to the acquisition of Essar Steel lasted for more than two years and laid down precedents on several questions arising out of the then newly introduced insolvency legislation in India. This paper is a comment on this judgment. It critically analyses the decision of the Supreme Court and the impact of the judgment on insolvency law in India.
Dewan Housing: Why insolvency resolution processes need a greater degree of certainty
In November 2019, Dewan Housing became the first non-banking financial company to be referred to the insolvency resolution process under Indian bankruptcy law. The process has seen four rounds of bids, of which the last two were driven by a bid submitted after the deadline. While one bidder withdrew from the process on grounds of unfair treatment, other bidders have protested against the late-stage non-compliant bid, which has further prolonged the insolvency resolution process and created a threat of litigation. While late-stage bids may be acceptable in exceptional circumstances, this cannot be allowed to become a regular feature of the insolvency resolution process. As described in more detail in this note, maximization of value of assets is not the sole objective of an insolvency resolution regime; such regime must also provide transparency and certainty, symmetry of information and a time-bound process to better preserve economic value.
Non-convertible Debentures: Entry Routes for Foreign Investors
Since January 2020, there have been more than 10 public issues of non-convertible debentures (NCDs) and over 1,600 private placements of corporate bonds in India. M&A transactions in India have also increasingly witnessed NCDs as a preferred instrument for funding, which may be attributable to the benefits that NCDs could provide to investors vis-à-vis equity instruments. Separate regulatory frameworks apply to acquisition of NCDs by registered foreign portfolio investors on the one hand and other foreign investors on the other hand. Further, Indian regulators have sought to encourage offshore debt funding, for example, by introducing the voluntary retention route for foreign portfolio investment in debt instruments. Accordingly, this note provides an overview of investment routes available to foreign investors in relation to NCDs.
Impact of COVID-19 on Proceedings under the Insolvency and Bankruptcy Code, 2016
This note, first published on the National Law School Business Law Review blog, discusses recent amendments to the [Indian] Insolvency and Bankruptcy Code, 2016 in light of the COVID-19 pandemic, which inter-alia temporarily prevent creditors from initiating insolvency proceedings against corporate debtors. While the proposed changes are a step in the right direction, the Government should also consider the impact of the pandemic on pending proceedings as well as alternative mechanisms to restructure debt and resolve defaults in a cost-effective manner to preserve value.