Capital Markets Archives - S&R Associates

Evaluating the Regulatory Framework Governing Executive Compensation in Listed Companies

Insights | April 2, 2025 | Practice Area: Capital Markets, General Corporate, Regulatory

Executive compensation in listed Indian companies is determined through a three-stage process involving the Nomination and Remuneration Committee (“NRC”), the Board of Directors, and shareholders. The NRC identifies candidates, formulates a remuneration policy, and submits recommendations to the Board. The Board then reviews and approves these recommendations before presenting them to shareholders for a final vote. While shareholders theoretically have the ultimate authority, ambiguities in India’s regulatory framework may weaken its effectiveness. This note examines key issues in executive compensation governance, analyzing relevant regulations and proposing solutions to enhance the framework.

Investing in India: An Overview of Legal Considerations – 2025 Checklist

Insights | February 5, 2025 | Practice Area: Capital Markets, Competition/Antitrust, InvITs, InvITs; REITs and Business Trusts, Mergers and Acquisitions, Private Equity, Regulatory, Tax

Foreign investment continues to play a crucial role in India’s economic growth with India achieving the milestone of having received USD 1 trillion of foreign direct investment since April 2000. While the cumulative FDI received in the financial years ended March 31, 2023, and March 31, 2024 remained similar, there has been an increase in the FDI received between April 2024 to September 2024 in comparison to previous years.
This note examines certain key legal considerations for foreign investors investing in India and highlights key updates included in the legal framework during the calendar year 2024.

Regulatory Landscape for Specialized Investment Fund: A New Asset Class

Insights | December 19, 2024 | Practice Area: Capital Markets, Investment Funds, Regulatory

The Securities and Exchange Board of India (“SEBI”) amended the SEBI (Mutual Funds) Regulations, 1996, to introduce a new asset class, the Specialized Investment Fund, effective December 16, 2024. The amendment aims to bridge the gap between Mutual Funds (“MFs”) and Portfolio Management Services (“PMS”) by offering a product suited for sophisticated investors with a risk-return profile between that of MFs and PMS.

SEBI Revitalizes the Indian Rights Issue Framework

Insights | December 17, 2024 | Practice Area: Capital Markets, Regulatory

A new rights issue framework proposed to be introduced by SEBI will allow timely access to capital and allow public shareholders to participate without significant dilution of their shareholding. Allowing promoters to renounce their rights entitlements in favor of select investors makes rights issues an attractive alternative to other methods of fund raising that may require shareholders’ approval. The SEBI proposal streamlines the rights issue process, significantly shortens timelines and rationalizes compliance requirements while introducing flexibility for companies to raise funds from select investors. This note provides an overview of the SEBI proposal for the new rights issue framework.

Restriction on Stock Brokers from Engaging in Other Businesses

Insights | December 12, 2024 | Practice Area: Anti-corruption; Fraud and Investigations, Capital Markets, Regulatory

Regulators in India are increasing looking at the businesses of entities and seeking to restrict the business activities to specified categories that they believe should be carried out by such regulated entities. One such interesting case relates to the permissible business activities of a stock broker. This note discusses the proposed amendment by the Government to Rule 8(1)(f) and Rule 8(3)(f) of Securities Contracts (Regulation) Rules,1957 in light of the enforcement actions taken against stock brokers and highlights the need to strike a balance between the commercial requirements of the stock broker and protecting the interests of its clients.

Regulatory Spotlight on Mutual Funds

Insights | September 18, 2024 | Practice Area: Anti-corruption; Fraud and Investigations, Capital Markets, Regulatory

The Indian mutual fund industry has experienced significant growth in recent years, with data released by Association of Mutual Funds in India indicating that assets under management increased from INR 25.48 trillion (USD 303 billion approximately) as on August 31, 2019 to INR 66.70 trillion (USD 795 billion approximately) as on August 31, 2024. The Indian securities market regulator, the Securities and Exchange Board of India (“SEBI”), has increased its scrutiny over the mutual funds industry and brought in certain amendments to regulations related to mutual funds. This note discusses SEBI enforcement actions against mutual funds and highlights the recent regulatory changes brought in to deter potential market abuse and increase investor confidence.

Related Party Transactions: Recent SEBI Scrutiny

Insights | August 13, 2024 | Practice Area: Anti-corruption; Fraud and Investigations, Capital Markets, Regulatory

The Securities and Exchange Board of India (“SEBI”) has been continuously calibrating the disclosure requirements applicable to Indian listed companies to increase transparency and accessibility of information to investors. Provisions regulating related party transactions (“RPTs”), and appropriate disclosure of such transactions, are a step in that direction. This note discusses two recent SEBI actions against listed companies related to RPTs and highlights the need for listed companies to have a comprehensive policy on RPTs that suitably addresses any perceived gaps or ambiguities.

Regulatory Spotlight on Disclosure of Key Performance Indicators

Insights | August 7, 2024 | Practice Area: Capital Markets, Regulatory

The Securities and Exchange Board of India (“SEBI”) has increased its scrutiny of key performance indicators (“KPIs”) included in offer documents. Its focus is aimed at enhancing the transparency of pricing and the disclosure of performance, allowing IPO investors to obtain a clearer understanding of an issuer and its business. Given the focus on KPI disclosures, IPO-bound companies (regardless of the industry) must devote sufficient attention to identifying KPIs relevant to their business and understanding regulatory expectations in this regard.
This note provides an overview of the SEBI framework for disclosure of KPIs in offer documents.

Decoding Front Running Trades

Insights | July 10, 2024 | Practice Area: Anti-corruption; Fraud and Investigations, Capital Markets, Regulatory

Front running trades are trades where an investor has placed an order in a stock while in possession of “non-public information” of “a substantial impending transaction” in that stock. Such trades not only distort the level playing field in the securities market by taking advantage of unequal information acquired through unfair means but also affect market integrity. This note tracks the evolution of jurisprudence related to front running in India and highlights the interpretational challenges and evidentiary issues relating to front running trades.

Voluntary Delisting in India

Insights | July 1, 2024 | Practice Area: Capital Markets, Mergers and Acquisitions

On June 27, 2024, the Board of the Securities and Exchange Board of India (the “SEBI”) approved certain proposals to amend India’s existing legal framework governing delisting of equity shares from public markets (“Proposed Amendments”). These are expected to address concerns that have discouraged an attempt at delisting from the Indian public markets. The Proposed Amendments are expected to become law shortly and will amend the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2021 (the “Delisting Regulations”) that govern the delisting process in India.
One of the key changes under the Proposed Amendments is the introduction of a fixed price as an alternative to the reverse book-building process to determine the exit price of the delisting offer. The fixed price offered by an acquirer must be at a minimum 15% premium over the floor price determined under the Delisting Regulations. The floor price calculation will now include, among other parameters, the calculation of an adjusted book value certified by an independent registered valuer. This reform provides more certainty to the delisting process, given that the acquirer is not subject to a reverse mechanism of pricing where the minority/public shareholders have a role in the determination of the exit offer price.
This note discusses the legal framework and the process involved for voluntary delisting under the Delisting Regulations and the implications of the Proposed Amendments.