The CAM Markets team can be reached at cam.mumbai@cyrilshroff.com

USING SPAC VEHICLES AS A MEANS OF LISTING OUTSIDE INDIA

An overview 

Special Purpose Acquisition Companies (“SPACs”) have made a comeback on the Wall Street. SPACs are essentially investment companies backed by sponsors to raise capital from the public in an initial public offering (“IPO”) in the USA for the sole purpose of using the proceeds to acquire targets that are to be identified after the IPO. The eventual objective is to list the target. As of July 31, 2020, SPACs have raised close to USD 24 billion globally this year. The buzz around SPACs with available funding has reached Indian shores on the possibility of Indian companies being potential SPAC targets or Indian companies teaming up with SPACs to potentially list themselves in overseas markets.
Continue Reading Using SPAC Vehicles as a Means of Listing Outside India

SEBI CONSULTATION PAPER FOR LISTED COMPANIES WITH STRESSED ASSETS - CURE FOR THE SICK COULD BE VACCINE FOR ALL 

With the slowdown in the economy and unprecedented business disruption due to Covid 19, several Indian listed companies, which were already heavily leveraged, will soon be looking at avenues for further funding to meet working capital requirements and liquidity challenges. Given the current regulatory regime surrounding raising of equity capital, it is possible that some of the over-leveraged ones may become insolvent. With a view to facilitate fund raising by such listed companies that have stressed assets, the market regulator has come up with a consultation paper, that provides certain procedural relaxations to the SEBI (Issue of Capital and Disclosures Requirements) Regulations, 2018 (ICDR Regulations) and SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SAST Regulations).
Continue Reading SEBI Consultation Paper For Listed Companies With Stressed Assets – Cure For The Sick Could Be Vaccine For All

Current Issues in the Mutual Funds Industry

Things indeed have been less than perfect for the mutual funds industry as a result of economic slowdown as well as specific events, key among which is the value deterioration across a number of industries and asset classes. The onset of COVID-19 has served to exponentially compound these problems. The most recent victim of the current situation is Franklin Templeton India, which announced its decision to wind-up six debt schemes, citing this as the only viable option to preserve value for unitholders and enable an orderly and equitable exit for all investors.

AMFI, the mutual fund industry body, has tried to assure investors that majority of fixed income AUM is invested in superior credit quality securities and schemes have appropriate liquidity to ensure normal operations. Mutual funds are not one homogenous mass and separate schemes have different investment strategy and underlying assets, but the supervening effect of the ongoing pandemic has created such redemption pressures and corresponding lack of cash flows, that the mutual fund industry has been dealt a body blow by the ensuing demand-supply liquidity mismatch.
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SEBI General Order 2020

Markets regulator Securities and Exchange Board of India (Sebi) has recently issued a General Order on issuing observations on offer documents when there are pending regulatory actions, superseding a 2006 general order on the same subject. The General Order 1 of 2020, which was issued on February 5, 2020, sets out the circumstances under which SEBI can withhold observations on draft offer documents (companies cannot launch issues until SEBI provides observations).

We discuss the SEBI order, its implications, and whether this is a step in the right direction for a disclosure-oriented securities regime.
Continue Reading SEBI General Order 2020: What it means for cos, investors & overall capital markets’ efficiency

Continuous disclosure obligations - Indian securities market

A regulatory environment that supports robust secondary market disclosures is critical for a well-functioning securities market. Ongoing disclosures by listed companies are being increasingly scrutinised by regulators, stock exchanges and market participants to see if timely and accurate disclosures of all material information are being made by the listed entity. Accordingly, it is important for companies to ensure that developments in their businesses translate to appropriate regulatory disclosures.

A recent example of the importance of secondary market disclosure is the Facebook case. In 2019, the US Securities and Exchange Commission (“SEC”) announced charges against Facebook Inc. (“Facebook”) for making misleading disclosures in its periodic filings against the risks pertaining to misuse of its user data by third parties. The SEC alleged that in public disclosures, Facebook presented the risk of misuse of user data as “merely hypothetical”, when they were aware that a third-party developer had actually misused Facebook user data. The SEC press release states that Facebook has agreed to pay $100 million to settle the charges.

We discuss this development and learnings for the Indian market below.
Continue Reading Continuous Disclosure Obligations: Learnings for the Indian Securities Market

SEBI-Streamlines-Rights-Issue-Process

The SEBI has streamlined certain aspects of the rights issue process that is expected to not only reduce the timelines but also provide clarity on the renunciation and trading of rights entitlements. These are welcome changes and will potentially make rights issues a preferred option to raise capital for listed companies.

Whilst rights issues are offerings to existing shareholders, it typically takes 55 to 58 days to complete the process (excluding SEBI review and the time taken for due diligence and drafting the offer document). The process involves (i) a minimum 15-day rights issue application period, (ii) mandatory participation by certain investors only through the non-ASBA process (such as through cheque) and (iii) a seven clear working days intimation prior to the record date. SEBI has addressed some of these concerns through amendments to the SEBI ICDR Regulations, SEBI Listing Regulations (both effective from December 26, 2019) and a circular with effect from February 14, 2020.
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Mutual Funds and Alternative Investments - Stewardship Code

Introduction

On December 24, 2019, Securities and Exchange Board of India (“SEBI”) released a circular setting up a stewardship code for Asset Management Companies (“AMCs”), Mutual Funds (“MFs”) and all the categories of Alternative Investment Funds (“AIFs”) investing in listed Indian companies (“Stewardship Code” or “Code”). In keeping with global trends, SEBI has made it necessary for the power wielding cash-rich institutional investors, to act in accordance with the responsibilities that invariably accompany and behoove such powers and formulate a policy adopting the principles enshrined in the Code.

The Stewardship Code prescribes certain principles which, aim at enhancing the responsibilities of the AMCs/ AIFs to protect the interests of their investors/beneficiaries. The requirements pertaining to the Stewardship Code shall come into effect on April 1, 2020.
Continue Reading Being Responsible Corporate Citizens – How Mutual Funds and Alternative Investment Funds will Rise Up to the Stewardship code

Electrosteel Steels Limited v. Securities and Exchange Board of India

On November 14, 2019, almost a decade after the initial public offering of Electrosteel Steels Limited (Electrosteel), the Securities Appellate Tribunal (SAT) delivered its judgment in Electrosteel Steels Limited v. Securities and Exchange Board of India[1] (the SAT Order). It partially upheld the judgment dated March 31, 2016 (SEBI Order) of the adjudicating officer of the Securities and Exchange Board of India[2] (SEBI). The SAT Order has discussed the concept of ‘materiality’ in the context of disclosure in offer documents.
Continue Reading To Disclose or Not to Disclose? An Analysis of the Order of the Securities Appellate Tribunal in Electrosteel Steels Limited v. Securities and Exchange Board of India

Depository Receipts - SEBI Framework SMM

The Securities and Exchange Board of India (SEBI) has introduced a framework for issuance of depository receipts (DRs) by companies listed or to be listed in India ( DR Framework), by its circular dated October 10, 2019.

In the early years of liberalisation and up to the time SEBI permitted qualified institutions placement (QIPs) in 2006, DR issuances formed a significant and important part of foreign investment into the Indian equity markets. However, in the past five years, there have been very few DR issuances, for a variety of reasons including due to regulatory uncertainty around operational guidelines for DRs and concerns in relation to compliance with rules under the anti-money laundering legislation.
Continue Reading SEBI Introduces Framework for Issuance of Depository Receipts

Revised norms for foreign portfolio investors SEBI

The norms surrounding foreign portfolio investors have undergone continuous changes and tweaks since liberalisation. The framework introduced by Central Government was first consolidated and expanded upon by the Securities and Exchange Board of India (SEBI) under the SEBI (Foreign Institutional Investors) Regulations, 1995 (1995 Regulations).

A little under a decade later, in 2014, SEBI took steps to consolidate the categories of investors previously accessing Indian capital markets – i.e., foreign institutional investors, sub-accounts and qualified foreign investors – into a single class known as ‘foreign portfolio investors’ (FPIs). SEBI also delegated the responsibility of registering such FPIs to designated depository participants (DDPs). Multiple questions arising out of the new regime were subsequently answered by SEBI in a series of frequently asked questions (FAQs), updated from time to time. The 2014 Regulations also incorporated concepts such as opaque structures and a scope of investor group, which did not find a mention in the 1995 Regulations but were introduced through notifications and instructions from SEBI.

Five years later, SEBI has issued revised norms for FPIs in terms of the SEBI (Foreign Portfolio Investors) Regulations, 2019 (2019 Regulations) with a number of changes (as suggested by the committee headed by Mr. HR Khan), some to concepts dating back to the regime under the 1995 Regulations. The 2019 Regulations also consolidate the extensive guidance and requirements prescribed by SEBI by way of amendments to the 2014 Regulations as well as circulars and FAQs issued thereunder.

This post discusses some of the key aspects of the 2019 Regulations.
Continue Reading Revised Norms for FPIs: New Wine in a New Bottle