Photo of Ananya Pandit

Associate in the General Corporate Practice at the Mumbai office of Cyril Amarchand Mangaldas. Ananya advises on PE investments, mergers and acquisitions and general corporate matters. She can be reached at ananya.pandit@cyrilshroff.com.

DOWN ROUNDS ARE COMING - ENFORCEMENT OF ANTI-DILUTION ADJUSTMENTS

Introduction

The standstill of global economic activity and consequent market downturn caused by the Covid-19 outbreak has delivered a double whammy of capital scarcity and significant valuation correction across several asset classes. Many Indian companies will be in the race to restructure business and/or raise capital, unfortunately, at reduced enterprise valuations.

For businesses with existing venture capital and private equity investors, the looming slew of ‘down rounds’ will trigger anti-dilution rights attaching to convertible securities held by their existing shareholders.

Anti-dilution adjustments are self-executing rights that offer protection from value erosion in the form of reduction of conversion price of securities, translating into a proportional increase in the number of equity shares issuable to the investor on conversion.
Continue Reading Down Rounds are Coming: Enforcement of Anti-Dilution Adjustments