On the back of its new electoral mandate, the Modi Sarkar 2.0 government recently presented its first budget. The budget focuses primarily on infrastructure spending and boosting investment from private and foreign investors, with the government forecasting that the Indian economy will grow to $5 trillion by 2025. Following the budget announcement, a slew of reforms and policies are expected in the coming months. This article highlights some of the key capital market-related amendments.
The Financial Stability Report published by the Reserve Bank of India in mid-2011 alluded to the high probability of default in the repayment of foreign currency convertible bonds (FCCBs) by Indian companies. With the global and Indian economies now facing the prospect of a double-dip recession, overseas lenders (including FCCB holders) are worried about the ability of Indian bond issuers to redeem their investments.
At the time of an initial listing of shares, a minimum offer is generally prescribed, while a minimum public float is prescribed for continued listing based on the Listing Agreement. Given the volatility of the global market since 2008, the Indian finance minister has proposed to raise the threshold for non-promoter, public shareholdings for all listed companies.
The Securities and Exchange Board of India (SEBI) recently decided its listing requirements for small and medium-sized enterprises (SMEs). This update looks at some of the key decisions made. SEBI has been working to establish an SME exchange or a separate platform for SMEs on the stock exchanges. It is hoped that these new changes will strengthen the position of SMEs within the capital market.
The Reserve Bank of India recently placed the draft guidelines on the issuance of non-convertible debentures of maturity of less than one year open for comment. At present, neither the Securities and Exchange Board of India nor the government regulates the issuance of non-convertible debentures with original maturity of less than one year.
The Securities and Exchange Board of India recently replaced the Disclosure and Investor Protection Guidelines 2000 with the Issue of Capital and Disclosure Requirements Regulations 2009. Together with incorporating the provisions of the old guidelines, certain changes have also been made by removing redundant provisions, modifying certain provisions and clarifying the provisions related to investor protection.
The Securities and Exchange Board of India recently notified new regulations on the delisting of listed company equity shares. As well as providing greater clarity on the procedures involved in the delisting of equity shares, the regulations introduce more stringent requirements for the voluntary delisting of equity shares, making this process more difficult for company promoters.
The Securities and Exchange Board of India (SEBI) has announced a series of measures to boost investor confidence in the primary market and mutual funds. Among other changes, SEBI has now approved the concept of 'anchor investors', which is widely used around the world. An anchor investor is an investor which subscribes to up to 30% of the quota for institutional investors in an initial public offering.
The Securities and Exchange Board of India has made it mandatory for company promoters to reveal details of shares they have pledged in their listed entities. Promoters must provide details of the pledge of shares and the release or sale of pledged shares to the company, and the company will report the same to the public through the stock exchanges.
Following the Satyam scandal, the Securities and Exchange Board of India has initiated a brainstorming session to assess the role of top company personnel (eg, promoters and independent directors) and to address problematic grey areas in various pieces of legislation (eg, the insider trading regulations).
Until recently the Securities Exchange Board of India (SEBI) had banned all assured returns and capital schemes, which are popular investment grounds globally, from the Indian market. However, after considerable lobbying SEBI has now amended the SEBI (Mutual Funds) Regulations 1996, authorizing the launch of capital protection-oriented schemes in the Indian market.
The Ministry of Finance has further liberalized the Scheme for the Issue of Foreign Currency Convertible Bonds and Ordinary Shares (through the Depositary Receipt Mechanism) 1993 by permitting unlisted Indian companies to sponsor an issue of American depositary receipts or global depositary receipts.
The Securities and Exchange Board of India has taken the final step in the process to allow foreign companies to raise capital via the Indian stock market. The introduction of a new chapter to the Disclosure and Investor Protection Guidelines frames the eligibility criteria for foreign companies wishing to raise capital in this way.
The Securities and Exchange Board of India has doubled the creeping acquisition limit under its Substantial Acquisition of Shares and Takeovers Regulations 1997 from 5% to 10%. The new limit will apply for six months.
Raising funds by issuing commercial papers to meet the working capital requirements of companies is gaining popularity, as this is a quick method of raising funds without the necessity of issuing prospectuses and obtaining approvals from the Securities and Exchange Board of India.
Including: Companies Rules 2001; Corporate Governance; Company Deposits; Shelf Prospectus.
Under the Companies (Amendment) Act 2000 a company may issue shares with differential voting rights to the extent of 25% of the total share capital, provided it has distributable profits in the three years preceding such issue.
The Securities and Exchange Board of India (SEBI) will allow trading in initial public offering through brokers. The new guidelines for insider trading are expected to be finalized in the next couple of months.
The Securities and Exchange Board of India has amended regulations concerning mutual funds. The limit on investment in listed companies has been raised and unit holders' approval of changes in controlling stake is no longer required.
The Securities Exchange Board of India has instructed mutual funds to pay 15% interest on late redemption payments owed to investors.