Capital Markets Archives - S&R Associates

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 8, 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.

Regulatory Spotlight on Identification of Promoters

Insights | April 3, 2024 | Practice Area: Capital Markets, Corporate Governance and ESG, Regulatory

Identification of “promoters” ahead of an initial public offering in India is a critical step given the resultant disclosure requirements, obligations and other implications. In the recent past, the Indian securities regulators have increased their scrutiny over the persons and entities being identified as promoters in offer documents.
This note provides an overview of certain recent developments in connection with the identification of promoters.

Short Selling in India

Insights | April 2, 2024 | Practice Area: Capital Markets, General Corporate, Regulatory

Short selling in India has been in the spotlight as highlighted by the events triggered by the publication of a report by Hindenburg Research in 2023 (the “Hindenburg Report”). The Indian Supreme Court considered short selling pursuant to petitions filed following the publication of the Hindenburg Report. This was followed by SEBI reissuing its framework for short selling.

REITs and InvITs: Evolution of the Regulatory Landscape in India

Insights | March 15, 2024 | Practice Area: Capital Markets, Corporate Governance and ESG, InvITs; REITs and Business Trusts, Real Estate, Regulatory

Business trusts play a significant role in Asian and global capital markets. India introduced real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) in 2014. As the regulatory regime approaches the completion of a decade, this note reflects on the evolution of the regulatory landscape for REITs and InvITs in India.

Regulatory Shifts in India’s Satellite Communication Landscape

Insights | March 11, 2024 | Practice Area: Capital Markets, General Corporate, Mergers and Acquisitions, Private Equity, Tax

There is a rising interest in satellite-based connectivity in the Indian market among internet service providers. Eutelsat OneWeb India, Jio Satellite Communications, Elon Musk’s Starlink and Amazon’s Kuiper are in the process of obtaining the requisite licenses to provide satellite communication services in India. Satellite communications represent an inevitable technological development in response to a continued demand for better network quality and higher capacity.
In this background, the Telecommunications Act, 2023 (“Telecommunications Act”) which received the President’s assent on December 24, 2023 and provides for administrative allocation of satellite spectrum as well as liberalization of the FDI policy applicable to the space sector further spurs the gaining momentum in satellite-based communication technology in India. This note explores the regulatory shifts in the Indian satellite communications landscape.

Indian Tax Treaties: Capital Gains and Beneficial Ownership Test

Insights | March 5, 2024 | Practice Area: Capital Markets, General Corporate, Mergers and Acquisitions, Private Equity, Tax

India’s double tax avoidance agreements (“DTAAs”) with certain countries (for e.g. Singapore, Mauritius and the Netherlands) provide that the capital gains on sale of shares is taxable only in the resident country of transferor and no tax is payable in India. However, the tax authorities have disputed the benefit available under the DTAAs by applying the “beneficial ownership” test. Further, they have also argued the sufficiency of tax residency certificate (“TRC”) to claim such benefit. In this note we analyze these aspects in light of the decision of Delhi High Court in Blackstone Capital Partners (Singapore) VI FDI Three Pte. Ltd., appeal against which has been recently admitted by the Supreme Court.

Investing in India: An Overview of Legal Considerations

Insights | February 28, 2024 | Practice Area: Capital Markets, General Corporate, Mergers and Acquisitions, Private Equity, Regulatory, Restructuring and Insolvency

Foreign investment is a key contributor to India’s growth story and India continues to consistently experience growth in inflow of foreign direct investment (“FDI”). The Government of India has announced that the provisional figure of FDI inflow into India for the financial year ended March 31, 2023 was USD 71 billion and according to the United Nations Conference on Trade and Development (UNCTAD) World Investment Report, India remains a favored destination for global investors.
In this note we discuss certain key legal considerations for a foreign investor investing in India.