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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PRIVATE EQUITY IN A COVID-19 WORLD - ASSESSING THE IMPACT OF THE PANDEMIC ON PE INVESTMENTS IN INDIA Blog

As the global tally of COVID-19 cases rises steadily, the pandemic has proven to be an unprecedented public health emergency of our time. With nations enforcing social distancing, lockdowns and travel restrictions, the global economy has witnessed a drastic downturn. Closer to home, in India, RBI has warned of a growth slowdown, and the capital markets have slumped. Private equity investments in the country have taken a hit, and the pandemic has caused investors to reassess new and existing investments.

Given the likely economic aftermath of COVID-19, key issues that have come to the forefront are: (a) whether COVID-19 constitutes ‘material adverse effect’ or ‘material adverse change’ (hereinafter, referred to as “MAE”) under existing agreements; and (b) with the economic uncertainty in the backdrop, the manner in which price or value of new deals can be accurately determined, going forward. This post sheds light on the abovementioned issues and chalks out ways to redress the same.
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Reimagining the Good Times - Start-ups and the Covid-19 Crisis

In recent years, the start-up ecosystem in India has emerged as a reckoning force, largely due to efforts of stakeholders and initiatives implemented by the government to facilitate growth. Investments in start-ups surged from $550 million in 2010 to $14.5 billion in 2019.[1]

The Covid-19 pandemic has now adversely impacted the overall investment climate. While businesses across sectors have felt repercussions of the Covid-19 pandemic, start-ups have been particularly vulnerable and are facing formidable challenges both from a business and operations perspective. Most start-ups have witnessed a decline in supply/demand, except those engaged in supply/delivery of ‘essential services’ and edu-tech/gaming/streaming services. However, despite this increased demand, glitches in the supply chain network have presented challenges. The start-up ecosystem has been striving to adapt to the present situation by focussing on the need to innovate and diversify.
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Barbarians at the gate – no entry without approval

To say that the Covid-19 has unleashed unprecedented times is an understatement. Every country, government, regulator and citizen across the globe is trying to come to terms with the implications of this deadly virus and surviving it. It is indeed a Hobson’s Choice – to save lives or to save the economy. But several countries, in said and unsaid words, have expressed vulnerability to the corporate raiders from China! They are literally at the gate and it has become a cause of worry for most governments and corporations.

Japan has proposed building an economy that is less dependent on China, so that Japan can mitigate supply chain disruptions caused by the current Covid-19 pandemic. To this end, Japan announced an emergency economic package on April 7, 2020, earmarking 240 billion yen (approximately USD 2.2 billion) for fiscal 2020 to pay  Japanese manufacturing firms to leave China and relocate production either to their home country or to diversify their production bases into South East Asia. Australia, Italy, Spain, and Germany have announced amendments to their respective foreign investment laws to make acquisitions and takeovers by foreigners much harder. So has the European Union. The Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA) of the United States has seen increased review of foreign investments under the Trump administration due to security and national interest concerns.
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 REITs in India - Some predictions for the next 24 months

  • Tenant-landlord dynamics are likely to change. In the short term, tenants may seek dispensation, moratoriums or discounts to their payment obligations, on the grounds of force majeure or otherwise. In the medium term, there will be an expectation from developers to increase spend on social wellness and hygiene infrastructure.
  • The forced experiment of remote working may become a norm for certain businesses and have an impact on the flexi-working policies of all businesses, one way or another. As a result, tenants may reassess their space utilisation requirements, and developers, their ability to offer IT infrastructure, which can enable seamless connectivity for their tenants.

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Real Estate’s ride through Covid-19 and way forward

The outbreak of the novel coronavirus, referred to as Covid-19, has struck at the roots of some of the world’s largest countries. After WHO declared Covid-19 a Pandemic (the “Pandemic”), many countries announced measures to contain its spread. In what is considered as a timely step, Government of India on March 24, 2020 imposed a 21-day nationwide lockdown (“Lockdown”) under the provisions of Disaster Management Act, 2005 (“DMA”) (which is likely to get extended further), during which various establishments including malls, offices etc., were directed to suspend their operations.
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COVID-19 - Temporary Relaxations for Corporate Compliances

The global outbreak of coronavirus (COVID-19) is an unprecedented event that has led to lockdowns and unexpected restrictions on the public as well as the corporate sector across the world. In order to control its spread, the Government of India (GoI) has inter alia ordered all establishments, except organisations providing essential goods and services, to temporarily close their physical offices. Employees are working remotely, but due to difficulties faced in coordination and lack of office facilities, companies are likely to face difficulties in undertaking timely compliances of various applicable laws. Keeping in mind the aforesaid, the GoI has temporarily relaxed a number of compliance requirements for the corporate sector. We have analysed below some of the major relaxations from securities and companies law perspective.
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COVID 19 - Online Courts in India

Work from home for a litigating lawyer in India currently looks like endless hours of reading, chores and on-demand video. In this blog, we argue that this will be a short-lived state of affairs. Remote working for litigation will be operationalised soon and will become the new normal for litigating lawyers in the not too distant future.

Courts are an essential service for civil society. In the wake of the COVID-19 pandemic, courts across the country have gone into an urgent-only, online-only mode with electronic filings, email mentions and, in exceptional cases, online hearings via video conferencing/ video calling facilities. This urgent only model of restricted judicial access is not sustainable past the initial lockdown. Courts will have to resume a full-time case load in the near future, albeit in a form that will be quite different from the way as we knew it. The urgent-only format will come to pass, with courts adopting the online-only format for its regular functioning. As a first step, the Supreme Court of India issued a suo-motu order yesterday setting out guidelines for courts to function through video conferencing during the COVID 19 Pandemic.
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COVID-19 - Impact on Real Estate

With a lot of disruption and backlog due to coronavirus, all industries, along with the real estate sector, have taken a massive hit. The year 2019 was not such a progressive year and everyone was counting on 2020 to recover and improve from last year’s lows. However, the real estate sector is in a deep standstill on the back of the global economic crisis, coupled with the COVID-19 situation.

This scenario calls for anyone to take precautions and due to restrictive movement because of the travel ban and the stock market crash, developers for one are not looking to take any chance in blocking their money in launching any new projects. At this point, one of the challenges being faced by them is the impact on contracts/agreements due to COVID-19, which are currently in motion/existence. The question being raised is whether the COVID-19 pandemic calls for a force majeure consideration in the existing contracts. Force majeure clause acts as a protection to parties wherein due to any unforeseen circumstances, either of the parties are unable to fulfil their commitment as per the agreed terms and conditions of the contract. To put it simply, due to any acts of god such as fire, flood, war, etc., parties are unable to perform their part as it is not reasonably within the control.
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COVID-19 - A lot done, more needs to be done

With the World Health Organization (WHO) declaring Coronavirus or COVID-19 a pandemic, it is now essential that countries and organisations that have the ability to find solutions come together, share information as much as possible and work together across borders. Already, experts are worried that the impact of Covid-19 may surpass that of the 2008 global downturn. Till date, globally, nearly 4,71,417 people have tested positive and approximately 21,295 have lost their lives to the deadly virus. On the date of drafting this article, the number of COVID-19 positive cases in India had crossed 700 (seven hundred), with 14 (fourteen) people succumbing to the disease. India is now under a full government ordered 21-day lockdown. A cure remains elusive till date. But in the words of famous author Louisa May Alcott, ‘Be comforted, dear soul! There is always light behind the clouds’. And it is this light that India needs to focus on in order to secure a future that survives the present.
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