Analysis of recently attempted Voluntary Delistings

The number of voluntarily delistings seen in the last 1 (one) year has surpassed the number of delistings attempted earlier in a single year. Promoters are choosing to voluntarily delist their companies from the stock exchanges for various reasons including stock market price not being reflective of true value of the company’s stock, having full control over operations (without being required to go for any public vote for critical transactions), restructuring of their group entities, greater flexibility and reducing costs related to numerous regulatory compliances.

Even the Securities and Exchange Board of India (SEBI) introduced various amendments (mostly for tightening of procedure) under the new SEBI (Delisting of Equity Shares) Regulations, 2021 (2021 Delisting Regulations). The 2021 Delisting Regulations replaced the old SEBI (Delisting of Equity Shares) Regulations, 2009 (2009 Delisting Regulations). However, the key elements of a delisting process i.e. requirement of super majority of minority shareholder being in favour of the delisting proposal and the bidding process through the reserve book build (RBB) mechanism remain the same even under the new 2021 Delisting Regulations.
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Post-IPO financial results

Under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended (“SEBI Listing Regulations”), listed companies are required to submit their financial results within 45 days of end of each quarter, other than the last quarter of a financial year where they have 60 days.

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Major Impetus to IPO Rush

Despite the challenging times, the Indian capital markets are hitting all-time highs on a daily basis and have been flooded with capital. This has seen a rush of equity offerings over the last 12 months including record filings for draft documents over the last few months. In their continuous efforts to make India exchanges more competitive, the Securities and Exchange Board of India (“SEBI”) has notified the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) (Third Amendment) Regulations, 2021 (“ICDR Amendment”). Pursuant to the ICDR Amendment, SEBI has revisited some of the requirements relating to lock in of equity shares post-IPO (one of the oldest requirements of SEBI), as well as the concept of  promoter group and group companies under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018, as amended (“ICDR Regulations”).

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PRIOR INTIMATION REQUIREMENT UNDER THE LISTING REGULATIONS - A CRITIQUE 

Introduction

Norms concerning corporate governance in India have evolved over a period of time. Since markets and businesses are inherently dynamic, they continue to evolve globally. The Securities and Exchange Board of India (“SEBI”), to its credit, has been on the ball and contributed significantly towards raising the standards of corporate governance for listed entities in India. The proof of the pudding, however, is in the eating and to this end, this piece examines the relevance of the extant requirement of prior intimation prescribed for listed entities in the current market.

Regulations 29 of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended (“Listing Regulations”), requires a listed entity to intimate the stock exchanges beforehand if its board of directors (“Board”) have a meeting scheduled to consider certain specified proposals, including financial results, buy-back of securities, voluntary delisting and fund raising (intimation is also required for general meeting or postal ballot for this proposal indicating the type of issuance).
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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.
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WHAT IS FRONT RUNNING – A Q&A PIECE IN LIGHT OF THE SEBI ORDER AGAINST DEALERS OF RELIANCE SECURITIES LTD

Introduction

In an interim ex-parte order last month against the dealers of Reliance Securities Limited (“RSL”) and other related entities (“RSL Order”)[1], SEBI prima facie held over two dozen entities to have engaged in front running the trades of Tata Absolute Return Fund, a scheme of Tata AIF (“Big Client”).

During its preliminary examination, SEBI meticulously pieced together several bits of available circumstantial evidence and alleged an archetypal scheme of front running purportedly employed by three senior dealers (“Dealers”) at RSL, in nexus with various related entities. The RSL Order alleges that once the Dealers at RSL were privy to the non-public information of the impending orders of Big Client, they along with their connected broker or dealer entity would, through multiple trading accounts directly or indirectly controlled by them, place trades either in the Buy-Buy-Sell pattern or Sell-Sell-Buy pattern, around the time of the orders of the Big Client to generate substantial proceeds.
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Infrastructure Investment Trusts – Simplifying the Structure

The infrastructure sector is a key driver for any economy. Among the many avenues of financing large-scale investments in infrastructure, including mergers and acquisitions, private equity investments and capital raising, setting-up and establishing infrastructure investment trusts (“InvITs”) has begun to gain traction with developers of infrastructure projects, including by public sector undertakings, to enable them to monetise their assets and undertake further infrastructure development. In the last few months, an increasing interest has also been evinced by large private equity firms, development institutions and multilateral and bilateral financial institutions in not only investing in the units of InvITs, but also in setting-up InvITs either on their own or jointly with Indian developers due to the yields offered by InvITs and the favourable and welcome changes to the tax regime applicable to InvITs, including unlisted InvITs.
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The most valuable commodity I know of is information.

– Gordon Gekko, Wall Street

Over the past few weeks, the Securities and Exchange Board of India (SEBI) has passed three orders[1] (SEBI Orders) in the infamous ‘WhatsApp leak’ saga that has been in the news since November 2017[2]. Holding the impugned perpetrators guilty of violating insider trading regulations, the regulator has taken significant steps in pushing the boundaries of the concepts of insider, UPSI and insider trading.

Continue Reading SEBI and WhatsApp leaks: Every link in the chain matters

Debt capital markets - a bumpy road ahead

The novel coronavirus pandemic (“Covid-19”) has brought about a new set of challenges for the Indian economy. While our economy successfully weathered the 2008 financial crisis, the current scenario has halted economic activity for most of the sectors. While the reasons for the previous and current crises are different, some trends are similar. One of these is the inability of borrowers to service debt.

The 2008 financial crisis was characterised by defaults in various debt instruments such as term loans, external commercial borrowings and FCCBs. To combat this, the Reserve Bank of India introduced a host of measures such as relaxation on restructuring of various loan accounts[1] and allowance to firms to use rupee amounts to buy back FCCBs. Simultaneously, in order to create a vibrant market for corporate bonds[2], the Securities and Exchange Board of India introduced the Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations, 2008 (the “SEBI ILDS Regulations”).
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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).
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