Equity capital markets in India: regulatory overview

A Q&A guide to equity capital markets law in India.

The Q&A gives an overview of main equity markets/exchanges, regulators and legislation, listing requirements, offering structures, advisers, prospectus/offer document, marketing, bookbuilding, underwriting, timetables, stabilisation, tax, continuing obligations and de-listing.

To compare answers across multiple jurisdictions visit the Equity Capital Markets Country Q&A tool.

This Q&A is part of the global guide to equity capital markets law. For a full list of jurisdictional Q&As visit www.practicallaw.com/equitycapitalmarkets-guide.

Contents

Main equity markets/exchanges

1. What are the main equity markets/exchanges in your jurisdiction? Outline the main market activity and deals in the past year.

Main equity markets/exchanges

The two main national stock exchanges in India are the BSE Limited (BSE) and the National Stock Exchange of India Limited (NSE). The laws, rules, regulations and guidelines applicable to the listing of securities on both the BSE and the NSE are substantially identical and are administered by the Securities and Exchange Board of India (SEBI), India's securities markets regulator.

The BSE and the NSE each have three trading markets:

  • Capital market (trading in equity shares).

  • Derivatives market (trading in futures and options).

  • Debt market (trading in debt securities).

The BSE and NSE also have a currency derivatives segment. This chapter is concerned with only the "capital market" segment.

The capital market segment for trading in the equity shares of companies corresponds to the "main market" in exchanges elsewhere in the world. A "small and medium-sized enterprise" segment was introduced by the BSE and the NSE on 13 March 2012 and 31 August 2012 respectively, to facilitate the listing and trading of shares of small and medium-sized enterprises.

BSE

Established in 1875, the BSE (www.bseindia.com) is Asia's oldest stock exchange, and the first stock exchange to be recognised by the Government of India under the Securities Contracts Regulation Act, 1956 (SCRA). The BSE is a demutualised corporate entity, with a broad shareholder base which includes two leading global exchanges as strategic partners (namely, Deutsche Bourse and Singapore Exchange). BSE's equity index (S&P BSE SENSEX) is India's most widely tracked stock market benchmark index.

The BSE has lost some of its former pre-eminence and market share since the founding of the NSE, but because of its history as the only pan-Indian stock exchange, some of the advantages of listing on the BSE include:

  • Media attention.

  • Liquidity.

  • Heightened consumer awareness and confidence.

  • Visibility.

NSE

The NSE (www.nseindia.com) was established in 1992 as India's first screen-based electronic trading platform. The Nifty 50 index is the NSE's benchmark stock market index for the Indian equity market, with an ecosystem comprising:

  • Exchange traded funds (onshore and offshore).

  • Exchange traded futures and options (in India and abroad).

  • Other index funds and over-the-counter derivatives (mostly offshore).

The NSE was instrumental in creating the National Securities Depository Limited, which allows investors to securely hold and transfer their shares and bonds electronically.

Some of the principal advantages of listing on the NSE include:

  • Enhanced exit opportunities and liquidity.

  • Easier monitoring.

  • Faster decision-making.

  • Wider reach.

  • Lesser fees as compared to other exchanges.

Market activity and deals

Indian equity capital markets have seen a revival in 2015 from the slump they experienced during the preceding four years. According to data from Prime Database, Indian firms raised INR686,080 million through the public equity markets in 2015, 76% higher than the INR390,670 million that was raised in 2014. This increase was led by a revival in the primary markets and an increase in the amount raised through the "offer for sale" (OFS) mechanism on the stock exchanges.

In 2015, 21 companies completed main board initial public offerings (IPOs), collectively raising INR136,020 million, and OFS issues raised INR355,640 million. However, more than half the capital raised through OFS came from a single issue of Coal India Limited, where the Indian Government sold shares worth INR225,580 million.

Three of the most highly subscribed IPOs of 2015 were as follows:

  • Alkem Laboratories Limited: oversubscribed 44 times (issue size: INR13,477.64 million).

  • Dr Lal Pathlabs Limited: oversubscribed 33 times (issue size: INR6,319.10 million).

  • InterGlobe Aviation Limited: oversubscribed 6.15 times (issue size: INR30,171.37 million).

India is subject to exchange controls. Currently, only INR-denominated securities can list on the Indian stock exchanges. Companies incorporated outside India and meeting the eligibility criteria specified in the Companies (Registration of Foreign Companies) Rules, 2014 (IDR Rules) and the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR Regulations) can list INR-denominated Indian depository receipts (IDR) on the stock exchanges provided that they comply with the requirements of the IDR Rules and the ICDR Regulations.

 
2. What are the main regulators and legislation that applies to the equity markets/exchanges in your jurisdiction?

Regulatory bodies

The Indian capital markets are regulated and monitored primarily by the:

  • Securities and Exchange Board of India (SEBI).

  • Department of Economic Affairs (Ministry of Finance).

  • Ministry of Corporate Affairs.

  • Reserve Bank of India.

These regulators draft legislation, and issue circulars, notifications and guidelines, to regulate the securities market in India, and have powers of oversight on various market participants. The stock exchanges also frame their own rules, regulations and bye-laws to regulate the markets.

Legislative framework

The key statutes and regulations governing the equity securities markets in India are:

  • Companies Act, 2013, and the rules prescribed under it.

  • Securities and Exchange Board of India Act, 1992.

  • SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.

  • Securities Contracts Regulation Act, 1956, and the rules prescribed under it.

  • SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

  • SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

  • SEBI (Prohibition of Insider Trading) Regulations, 2015.

  • Depositories Act, 1996.

 

Equity offerings

3. What are the main requirements for a primary listing on the main markets/exchanges?

Main requirements

A primary listing in India refers to an IPO where an unlisted company undertakes a fresh issue of securities, or its existing shareholders undertake an offer for sale (OFS) of all or a part of the securities that they hold in an unlisted company, or a combination of both, for the first time to the public on the stock exchanges, with a consequent listing and trading of such securities.

An issuer can undertake an IPO provided that:

  • It has net tangible assets of at least INR30 million in each of the preceding three full years, of which not more than 50% are held in monetary assets. If more than 50% of the net tangible assets are held in monetary assets, the issuer must have made firm commitments to use such excess monetary assets in its business or project (not applicable for an OFS).

  • It has a minimum average pre-tax operating profit of INR150 million calculated on a restated and consolidated basis, during the three most profitable years out of the immediately preceding five years.

  • It has a net worth of at least INR10 million in each of the preceding three full years.

  • An aggregate of the proposed issue and all previous issues made in the same financial year (in terms of issue size) does not exceed five times the issuer's pre-issue net worth as per the audited balance sheet of the preceding financial year.

  • If the issuer has changed its name within the last year, at least 50% of the revenue has been earned from the activity indicated by the new name.

If the issuer does not satisfy the above conditions, it can still initiate an IPO provided that both:

  • The issue is made through a bookbuilding process.

  • The issuer undertakes to allot at least 75% of the offer to qualified institutional buyers (QIBs).

Other requirements

The following requirements must also be met for a primary listing:

  • The issuer, any of its promoters, promoter group, directors or persons in control must not have been debarred from accessing the capital market by the Securities and Exchange Board of India (SEBI).

  • The issuer must not have any promoters, directors or persons in control who have been, or who are, a promoter, director or person in control of any other company that is debarred from accessing the capital market under any order or directions made by the SEBI.

  • The issuer must not have any outstanding convertible instruments, or any other right, which would entitle any person with an option to receive equity shares (instruments of this nature must be converted before filing the red herring prospectus).

  • The number of prospective allottees in a public issue cannot be less than 1,000.

Minimum size requirements and minimum shares in public hands

The minimum issue size and allotment to the public in an IPO must be either:

  • At least 25% of the class of securities issued by the company, if the post issue capital of the company calculated at the offer price is less than, or equal to, INR16,000 million.

  • At least such percentage of the class of securities issued by the company equivalent to the value of INR4,000 million, if the post issue capital of the company calculated at the offer price is more than INR16,000 million but less than, or equal to, INR40,000 million.

  • At least 10% of the class of securities issued by the company, if the post issue capital of the company calculated at the offer price is above INR40,000 million.

If a company is able to list under any of the above criteria with less than a 25% public shareholding, it must increase its public shareholding to at least 25% within a period of three years from the date of listing.

 
4. What are the main requirements for a secondary listing on the main markets/exchanges?

Main requirements

The requirements for the listing of Indian depository receipts (IDRs) by foreign companies in India are different from the requirements for a listing of shares of a domestic company. IDRs are Indian rupee denominated depository receipts issued by a local depository, and represent a proportional ownership interest in a fixed number of underlying equity shares of the issuer, as determined by the issuer. Equity shares underlying the IDRs are deposited with an overseas custodian, who holds the shares on behalf of the depository.

Any issuer proposing to list its IDRs on a stock exchange in India must, among other things:

  • Have a pre-issue paid-up capital and free reserves of at least US$50 million.

  • Have a minimum average market capitalisation during the last three years in its home country of at least US$100 million.

  • Have a track record of distributable profits (that is, profits after providing for depreciation) for at least three out of the preceding five years.

  • Not have been prohibited from issuing securities by any regulatory body.

  • Have a track record of compliance with the securities market regulations in its home country.

  • Have a continuous trading record, or history on a stock exchange, in its home country for at least the three immediately preceding years from the date of the application for listing.

Minimum size requirements

An IDR issue must have a minimum issue size of INR500 million.

Minimum shares in public hands

There is no minimum public shareholding requirement for an IDR issue.

 
5. What are the main ways of structuring an IPO?

An IPO can be structured in one of the following ways:

  • A fresh issue of securities.

  • An offer for sale of securities by existing shareholders of the company.

  • A combination of both.

If a company fulfils the following conditions, it can undertake an IPO either through a fixed price issue or a book-built issue:

  • It has net tangible assets of at least INR30 million in each of the preceding three full years, of which not more than 50% are held in monetary assets. Provided that if more than 50% of the net tangible assets are held in monetary assets, the issuer has made firm commitments to utilise such excess monetary assets in its business or project (not applicable for an OFS).

  • It has a minimum average pre-tax operating profit of INR150 million calculated on a restated and consolidated basis, during the three most profitable years out of the immediately preceding five years.

  • It has a net worth of at least INR10 million in each of the preceding three full years (of 12 months each).

  • An aggregate of the proposed issue and all previous issues made in the same financial year (in terms of issue size) does not exceed five times the issuer's pre-issue net worth as per the audited balance sheet of the preceding financial year.

  • If the company has changed its name within the last year, at least 50% of the revenue has been earned from the activity indicated by the new name.

Where a company is unable to fulfil the conditions listed above, it is a mandatory requirement that the company undertake the IPO through a book-built issue. Additionally, the company must allot at least 75% of the offer to qualified institutional buyers (QIBs) and will have to refund the subscription money if it fails to make the said minimum allotment to QIBs.

 
6. What are the main ways of structuring a subsequent equity offering?

A listed company can raise additional equity share capital in a number of ways in accordance with the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR Regulations) and the Companies Act, 2013 (Companies Act). The main ways of structuring a subsequent equity offering are:

  • Public offer. If the company proposes to raise additional equity share capital from the public to meet minimum public shareholding requirements or otherwise, it can undertake a follow-on public offering (FPO).

  • Rights/composite issue. Companies that seek to raise additional equity share capital whilst attempting to limit the dilution of the stake of the existing shareholders often opt to raise additional equity share capital by way of a rights issue. An alternative that enables listed issuers to have the best of both worlds is a "composite issue", which is essentially a public cum rights issue.

However, an FPO, a rights issue and a composite issue all require the filing of a draft offer document with the Securities and Exchange Board of India (SEBI) unless the issuer is eligible for a "fast-track" issuance as a result of its established track record of past compliance.

  • Private placement. Companies can also make a subsequent equity offering by way of a private placement to a select set of investors by way of a preferential issue or a qualified institutions placement. However, in the absence of a specific exemption from the SEBI, both of these routes are only available to issuers that are in compliance with the minimum public shareholding requirements. A key distinction between the two mechanisms is that while securities can be allotted to promoters and persons related to the promoters of the issuer in the case of a preferential issue, this is not permissible in the case of a qualified institutions placement. However, while only qualified institutional buyers can subscribe to the securities that are offered under a qualified institutions placement, there is no such restriction with respect to a preferential issue.

  • Institutional placement programme. The institutional placement programme mechanism was specifically introduced to enable companies to meet minimum public shareholding requirements by either the issuance of fresh equity shares or an offer for sale of shares of existing shareholders. However, as in the case of a qualified institutions placement, only qualified institutional buyers can purchase securities that are offered under an institutional placement programme.

 
7. What are the advantages and disadvantages of rights issues/other types of follow on equity offerings?

Rights issue

In a rights issue, shares are offered to existing shareholders in proportion to their current shareholding. The principal advantage of a rights issue of shares is that the control of the company continues in the hands of existing shareholders. Many financially troubled companies use rights issues to pay debt, particularly when they are unable to borrow money. The disadvantage is that there is a limit to how much can be raised through this method, as the investing capacity of the existing shareholders is limited.

Public offer

The advantages of a public offer are that it increases public awareness about the company and provides easy access to capital and liquidity for a company to expand and diversify its business. The disadvantages are that the process is costly and time-consuming, and there are many regulatory requirements governing a public offer.

Private placement

The advantages of a private placement are that the process of raising funds through private placement is fairly simple and the cost is minimal. The disadvantage is that the company has a reduced market for bonds or shares, and may have to issue securities at a discount to compensate investors for their greater risk and longer-term returns.

 
8. What are the main steps for a company applying for a primary listing of its shares? Is the procedure different for a foreign company and is a foreign company likely to seek a listing for shares or depositary receipts?

Procedure for a primary listing

A company that is applying for a primary listing of its equity shares on the main board of the stock exchanges must undertake an IPO. In addition to the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR Regulations), the Companies Act and the rules made under it, among other things, prescribe matters such as the disclosure requirements and the issue procedure. An issuer proposing to undertake an IPO must also comply with the other statutory and regulatory requirements, as specified in the Securities Contracts Regulation Act, 1956 and the rules made under it, and any applicable industry-specific regulations.

The preliminary and most important step is the appointment of the merchant banker(s). Merchant bankers act as "book runners" for the IPO and are responsible for exercising due diligence with respect to statutory and regulatory compliance. They guide the issuer through the entire IPO process, including, among other things:

  • The appointment of other intermediaries and legal counsel.

  • Interfacing with the regulatory authorities.

  • Marketing of the issue.

  • Advising on pricing and valuation.

  • The allotment of securities under the IPO.

The merchant bankers and the legal counsel advise and assist the issuer with the documentation process, which is one of the most critical elements of the IPO.

In accordance with the ICDR Regulations, the pricing of an IPO can be determined through a bookbuilding process or by way of a fixed price. However, where the issuer fails to meet certain eligibility criteria specified in Regulation 26(1) of the ICDR Regulations, it is mandatorily required to undertake an IPO by way of a bookbuilding process. The bookbuilding process is essentially a mechanism where, during the period for which the issue is open, bids are collected from investors at various prices (within a specified price band) and the pricing is determined at the closure of the issue. In the case of a fixed price issue, the price of the securities is determined by the issuer (in consultation with the merchant bankers) upfront. In recent times, book-built IPOs have become the norm in light of the numerous advantages that the process offers, including, but not limited to, increased flexibility.

As part of the IPO process, a draft offer document (containing certain prescribed disclosures) must be prepared and submitted to the Securities and Exchange Board of India (SEBI) and the stock exchanges. In the case of a book-built issue, the draft offer document is called the Draft Red Herring Prospectus (DRHP). The DRHP must be filed with the SEBI at least 30 days prior to registering the offer document (that is, the Red Herring Prospectus (RHP)) with the relevant Registrar of Companies (RoC). It is also uploaded onto the website of the issuer, the SEBI and the stock exchanges, and is made available for public comments. An issuer can only proceed with the IPO after it has received the SEBI's "observations" on the DRHP and "in-principle" approvals from the stock exchanges where it plans to list its securities. While reviewing the DRHP, the SEBI usually seeks certain clarifications and confirmations, and upon the receipt of satisfactory responses and undertakings from the issuer and the merchant bankers, issues its observations. Parallel to this clarification/observation process and subject to the issuer and merchant bankers addressing all concerns, the stock exchanges issue "in-principle" approvals. The issuer has a period of 12 months from the date of issuance of the SEBI's observations within which it must open its IPO.

Subsequently, the merchant bankers arrange for management of the issuer to embark on road shows to meet institutional investors and analysts. This is the marketing phase of the IPO, and typically involves visits to major investor centres, often across countries. There are rounds of "question and answer" sessions that enable prospective investors to understand the business of the issuer and undertake an independent evaluation. The ICDR Regulations and the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (Insider Trading Regulations) outline the key restrictions that are applicable to the issuer, the management of the issuer, the merchant bankers and other intermediaries involved during the marketing phase of the IPO. The actual launch/opening of the issue is subject to the success of the marketing initiatives, suitable market conditions and investor interest.

In the case of a book-built issue, the issue itself is undertaken by way of an offer document called the Red Herring Prospectus (RHP), which is essentially an updated version of the DRHP which includes any additional disclosures/confirmations as directed by the SEBI and the stock exchanges. The RHP must be filed with the relevant RoC, the stock exchanges and the SEBI before the opening of an issue. The issuer must make a pre-issue advertisement after registering the RHP with the RoC, which must contain details of the price-band, timelines and certain other prescribed matters.

The "anchor" investor book opens one day before the issue opening date. Anchor investors are qualified institutional buyers that make applications to subscribe to large chunks of the issue (application value of at least INR100 million). They are allocated shares on a discretionary basis on the day of bidding itself. If the price fixed as a result of bookbuilding is higher than the price at which the allocation was made to anchor investors, they are required to bring in the additional amount. However, if the price fixed as a result of bookbuilding is lower than the price at which the allocation was made to anchor investors, the excess amount is not refunded to them. As a result, the anchor investors assume the risk of paying more than the issue price for the opportunity of subscribing to a sizeable portion of the issuer's share capital.

Once launched, the issue itself must be kept open for a period of at least three working days. However, it cannot be kept open for more than ten working days (including the days for which the issue is kept open in the case of a revision in the price band). The minimum subscription that is required to be received is not less than 90% of the offer through the offer document (excluding the offer for sale component of the issue, if any). In the case of a failure to achieve minimum subscription, the issuer is liable to immediately refund the application monies received, or risk paying interest with respect to any delay in issuing the refund.

After the end of the offer period and subject to the successful closure of the issue, the issuer that has undertaken the IPO by way of a bookbuilding process must also file a prospectus with the RoC, which contains details of the pricing and quantum of the securities. Under the Companies Act, 2013, equity shares under an IPO can be allotted only in a dematerialised form. While the pre-issue equity shareholding is "locked-in" for a period of one to three years post allotment under the IPO, the equity shares allotted to any anchor investor as part of the anchor investor portion of the IPO are locked-in for a period of 30 days from the date of allotment under the IPO. The issuer makes a listing application to the stock exchanges after a confirmation from the depositories in relation to the credit of the dematerialised equity shares. Trading in the equity shares of the issuer begins only after the stock exchanges issue a trading notice in relation to those shares.

Procedure for a foreign company

A foreign company cannot directly list equity shares on an Indian stock exchange. It can only list Indian depository receipts (IDRs). The procedure for the issuance of IDRs by a foreign company is very similar to the procedure for an IPO by a domestic issuer, and involves the following activities:

  • Appointment of merchant bankers and other intermediaries.

  • Due diligence.

  • Preparation of a DRHP.

  • Observations by the SEBI.

  • Filing of a RHP.

However, in line with the mechanics of the depository receipts themselves, there are certain additional intermediaries that must be appointed (including an overseas custodian and a domestic depository). Further, in addition to certain issue-related eligibility criteria, a foreign company can only undertake an issue of IDRs where:

  • It is listed in the country where it is incorporated.

  • It has a track record of compliance with the securities market regulations in that country.

  • It has not been prohibited from issuing securities by any regulatory body.

The ICDR Regulations also provide certain exemptions in the case of an IDR issuance, specifically with respect to certain specified procedural and disclosure requirements, and publicity restrictions. While the regulator has attempted to provide additional clarity as to the fungibility of IDRs into underlying equity shares of the foreign issuer in the past, the IDR mechanism has so far failed to draw the attention of all but one foreign issuer. Furthermore, there is a lack of clarity in relation to certain aspects of the mechanism, such as the restrictive eligibility criteria, approval process, institutional investor base, repatriation and taxation. As a result, while these questions remain, it seems unlikely that the IDR route will be viewed favourably by foreign companies.

 

Advisers: equity offering

9. Outline the role of advisers used and main documents produced in an equity offering. Does it differ for an IPO?

An IPO of equity shares on the main board of a recognised stock exchange is the standard primary listing mechanism in India. The IPO process involves a number of intermediaries, advisers and third parties, and the key personnel are outlined below.

Merchant bankers

In accordance with the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR Regulations), the issuer must appoint one or more merchant bankers (registered with the Securities and Exchange Board of India (SEBI)) and designate at least one of them as the lead. The merchant bankers are the gatekeepers of the IPO and have overall responsibility for ensuring the true, fair and adequate disclosure in, and otherwise completeness of, the offer documents. To this end, they complete the following:

  • Due diligence and documentation.

  • Manage procedural and logistical issues.

  • Recommend qualified intermediaries.

  • Interface with the SEBI and the stock exchanges.

  • Market the issue.

  • Advise the issuer as to the appropriate pricing and timing of the issue.

  • Underwrite the issue.

Typically, the issuer enters into an engagement letter with each merchant banker, which sets out the responsibilities of the merchant banker with respect to the issue and specifies the fee structure. However, if a merchant banker is also an "associate" of the issuer, its role is limited solely to the marketing of the issue.

The issuer and the merchant bankers enter into an "issue agreement" in accordance with the ICDR Regulations, typically immediately before the filing of the Draft Red Herring Prospectus (DRHP) with the SEBI. After receiving the SEBI's observations and closer to the proposed Red Herring Prospectus (RHP) filing date, the issuer, the merchant bankers and other syndicate members (typically, the broking arm of the merchant bankers and other brokers) enter into a "syndicate agreement", in relation to the marketing of the issue. Upon finalising the pricing date, the issuer, merchant bankers and other syndicate members enter into an underwriting agreement, which records the details of the underwriting arrangements between the merchant bankers and the syndicate members.

Legal counsel

In most IPOs, the issuer and the merchant bankers appoint their respective Indian legal counsel. Additionally, where the offering is marketed to investors outside India, the bankers typically appoint one or more international legal counsels to advise on matters such as applicable disclosure requirements, selling restrictions, transfer restrictions and taxation in such jurisdictions. Legal counsel are collectively involved in:

  • The due diligence process and documentation (including the drafting of the DRHP, RHP, prospectus and the various transaction agreements).

  • Drafting and advising on publicity and research guidelines.

  • Advising on comfort letters from the auditors.

  • Generally advising on legal matters pertaining to the issue.

At specific stages of the IPO process, the counsel issues legal opinions in connection with the issue, addressed to and for the benefit of the merchant bankers. These opinions are critical as they help the merchant bankers establish a "due diligence defence" with respect to the contents of the offer documents, if required.

Auditors

The ICDR Regulations require that the historical financial statements of the issuer (for the preceding five fiscal years) be restated in accordance with a prescribed format and presented in the DRHP, RHP and prospectus. As a result, the examination report from the auditors of the issuer in relation to the restated financial statements is an important document for an IPO. The DRHP and the RHP also contain a significant amount of information that is extracted or derived from the issuer's restated financial statements. The auditors review [the financial statements] and provide comfort letters addressed to, and for the benefit of, the merchant bankers. Whenever necessary, third-party chartered accountants/valuers can also be engaged by the issuer to provide independent certifications.

Registrar to the issue

In light of the large number of bids received in an IPO, it is essential to appoint a qualified and capable registrar to the issue (RTI). The RTI manages a host of pre-issue and post-issue matters which involve processing a substantial amount of data. The RTI, among other things, is responsible for:

  • Processing applications.

  • Data entry.

  • Allotment letters/refund orders.

  • Preparing refund data.

  • Redressing investor complaints.

The issuer enters into a "registrar agreement" with the RTI before the DRHP, which encapsulates the obligations of the RTI both before and after the IPO.

In addition to the above advisers, various other third parties and intermediaries can be involved in an IPO, including:

  • An advertising/public relations agency.

  • A professional printer.

  • Self-certified syndicate banks (SCSBs).

  • Bankers to the issue.

  • A monitoring agency.

 

Equity prospectus/main offering document

10. When is a prospectus (or other main offering document) required? What are the main publication, regulatory filing or delivery requirements?

A prospectus as defined under the Companies Act, 2013 means any document described or issued as a prospectus and includes a Red Herring Prospectus (RHP), a shelf prospectus or any notice, circular, advertisement or other document inviting offers from the public for the subscription or purchase of any securities of a body corporate.

In India, an issuer can only make a public issue of its securities (IPO or follow-on public offer) by issuing a prospectus, and is required to file various other documents during the listing process. A Draft Red Herring Prospectus (DRHP) is the first major document that must be filed with the Securities and Exchange Board of India (SEBI). The SEBI's observations on the DRHP (including with respect to any additional information to be incorporated into the offer documents) are responded to, and where necessary are incorporated into the DRHP (the issuer company provides an undertaking to this effect). Where the issue is being book-built, the RHP must be filed with the Registrar of Companies (RoC) before the issue opens. Once the price is determined, the company must file the final prospectus with the RoC (however, in a fixed price issue the prospectus is filed with the RoC before the opening of the issue). An abridged prospectus is given to the investors along with the bid cum application form. After filing with the RoC the RHP in a book-built issue (or a prospectus in a fixed price issue), the issuer must make a pre-issue advertisement. Additionally, the issuer must also publish advertisements in connection with the opening and closing of the issue.

In addition to making the filings as stated above, the issuer must also deliver certain material documents along with the RHP or the prospectus to the RoC. These material documents include:

  • The issue agreement.

  • The underwriting agreement.

  • The registrar agreement.

  • The board resolutions relating to the issue.

  • The "in-principle" approvals from the stock exchanges where the issuer lists its securities.

 
11. What are the main exemptions from the requirements for publication or delivery of a prospectus (or other main offering document)?

Whilst the nature and content of the offering document differs based on the nature of the offering, there are no exemptions from the requirements for publication or delivery of the documents required for an IPO or a follow-on public offer.

 
12. What are the main content or disclosure requirements for a prospectus (or other main offering document)? What main categories of information are included?

The prospectus issued by a company in connection with a public offering of securities must contain the disclosures specified in both the:

  • Companies Act, 2013 read with the Companies (Prospectus and Allotment of Securities) Rules, 2014.

  • Schedule VIII of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009.

The prospectus, as a general principle, must contain all information necessary to enable investors to make an informed assessment of the assets and liabilities, financial position, profits and losses, and prospects of the issuer and of the shares of the issuer, and of the rights attached to the shares.

The information to be included in the prospectus can be divided into the following main categories:

  • General information about the issuer.

  • Risk factors relating to the issuer, its industry, and India.

  • A description of the issuer's operations and principal activities.

  • Details of the Book Running Lead Managers (BRLMs).

  • Details of the legal counsels.

  • Details of the auditors.

  • Objects of the issue.

  • Details of the industry in which the issuer operates.

  • Details of the property, plant and equipment of the issuer.

  • Corporate governance compliance.

  • Organisational structure of the issuer.

  • Details of the issuer's management.

  • Details of promoters and principal shareholders.

  • Details of subsidiaries and group companies.

  • Recent related party transactions.

  • Selected financial information.

  • Restated and audited financial statements for a period of five financial years (the financial statements must not be more than six months old).

  • A description in narrative form of the issuer's management's discussion and analysis of its financial condition, changes in its financial condition and results of the operations for the periods covered by the financial statements and any significant factors affecting its operating results.

  • Material developments after the date of the last financial results.

  • Terms of the issue.

  • Material outstanding litigations.

  • Other miscellaneous information, including information relating to:

    • approvals of the government/regulatory authorities;

    • dividend policy;

    • basis of the issue price;

    • exchange rates;

    • capitalisation statement;

    • details of the issuer's share capital;

    • articles of association or charter;

    • rights attached to shares;

    • a summary of material contracts.

 
13. How is the prospectus (or other main offering document) prepared? Who is responsible and/or may be liable for its contents?

The prospectus is drafted by the legal counsel engaged by the issuer company and the Book Running Lead Managers (BRLMs) on the basis of the information provided by the issuer, the due diligence conducted by the legal counsels, and various discussions and meetings with the management of the issuer and the BRLMs.

The primary liability for the contents of the prospectus lies with the issuer and its directors and officers. Any subscriber in a public issue who suffers any losses or damages by reason of any untrue statement made in the prospectus is entitled to seek relief from:

  • Every person who is a director of the issuer as of the date of the prospectus.

  • Every person who is named in the prospectus either as a director or as having agreed to become a director or a promoter of the company.

  • Any person who has authorised the issue of the prospectus or an expert.

The Companies Act, 2013 also states that if a prospectus contains a statement which is not true, and is misleading, then every person who authorises the issue of that prospectus will be liable for fraud. If it is proved that a prospectus has been issued with the intent to defraud applicants, every person mentioned above will be personally responsible for all or any of the losses that a person may have incurred as a consequence of any contents mentioned in the prospectus.

 

Marketing equity offerings

14. How are offered equity securities marketed?

Marketing efforts are mainly directed towards institutional and non-institutional investors (including high net worth individuals). In recent times, a number of issuers have leveraged the interest that foreign institutional investors/foreign portfolio investors have shown in the emerging Indian economy, by directing their efforts to cater to such investors.

An IPO involves the use of a number of age-old marketing measures that enable the management of the issuer to have some "face time" with institutional investors and analysts. These include road shows and events, private investor meets/interactions and question and answer sessions. Merchant bankers use their domestic and international connections to arrange the aforesaid activities in major investment and financial hubs. Mutual funds and government-backed financial institutions often play the role of anchor investors in IPOs. A significant amount of time and energy is directed towards meeting and identifying such prospective anchor investors. The research wings/analyst teams of the syndicate members prepare and issue research reports after the filing of the Draft Red Herring Prospectus (DRHP), based on the factual information that is included in it. Usually, these research reports track and compare the issuer's historical financial performance with that of other listed industry peers, while also highlighting key differentiators. Syndicate members and brokers interface with their existing client relationships and help to build a demand in the non-institutional space.

An advertising/public relations agency is engaged by the issuer for regulatory compliance and to assist with its positioning. Upon filing its DRHP, the issuer is required to forthwith make a public announcement (disclosing the filing of DRHP with the Securities and Exchange Board of India) and inviting the public to give their comments. After registering its Red Herring Prospectus with the relevant Registrar of Companies, the issuer must issue a pre-issue advertisement, which must contain details of the price band, timelines and such other matters as specified in the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR Regulations). The issuer can issue advertisements for issue opening and issue closing. However, each of the advertisements must be in the format specified in the ICDR Regulations.

In recent times, the regulator has indicated its intention to activate the relatively dormant retail investor category. With the advent of self-certified syndicate banks and the application supported by block amount (ASBA) process, applying in an IPO is now easier and more convenient than ever before for retail investors. Merchant bankers and issuers may need to revise their marketing strategies to tap this segment in forthcoming IPOs.

 
15. Outline any potential liability for publishing research reports by participating brokers/dealers and ways used to avoid such liability.

The distribution of research reports in the period before, during, or after an offering creates several bases of potential legal liability. From an Indian law perspective, research reports must comply with the requirements of the Securities and Exchange Board of India (Research Analysts) Regulations, 2014 and the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009. Therefore, it is essential for syndicate members and research analysts to adhere to the research guidelines provided by legal counsel to reduce the risk of incurring civil and/or criminal liability. In particular:

  • Information barriers should be maintained between the analysts preparing the research and those divisions of the merchant banker advising the company or involved in the offering, including sales and trading personnel.

  • Research reports can only be prepared on the basis of information as disclosed by the company to the public in the Draft Red Herring Prospectus (DHRP).

  • The research reports should contain only factual information and not contain projections, estimates, conjectures or any matter extraneous to the contents of the DRHP.

  • The research report should contain the appropriate disclaimers.

  • No selective or additional information, or information which is extraneous to the information included in the DRHP or otherwise disclosed to the public, should be given by the offering participants to any particular section of investors or to any research analyst in any manner, including at road shows, presentations, in research or sales reports or at bidding centres.

Further, in compliance with the SEBI (Prohibition of Insider Trading) Regulations, 2015, a syndicate member must maintain an "ethical wall" to ensure that the employees of its research department do not receive unpublished price sensitive information. Any current or prospective syndicate member whose research department has had access to such information (for example, by attending due diligence sessions) should be prohibited from distributing any research until such information is either made public or becomes stale.

The Securities and Exchange Board of India (SEBI) strictly monitors compliance with securities regulations, and any violation can give rise to civil and/or criminal liability. In addition, the SEBI is empowered to impose penalties and/or suspend or cancel the merchant banker's certificate of registration.

 

Bookbuilding

16. Is the bookbuilding procedure used and in what circumstances? How is any related retail offer dealt with? How are orders confirmed?

The bookbuilding process can be either voluntary or compulsory. A company must compulsorily undertake a book-built issue if it does not fulfil the following conditions:

  • Has net tangible assets of at least INR30 million in each of the preceding three full years, of which not more than 50% are held in monetary assets. If more than 50% of the net tangible assets are held in monetary assets, the issuer must have made firm commitments to use such excess monetary assets in its business or project (not applicable for an offer for sale).

  • Has a minimum average pre-tax operating profit of INR150 million calculated on a restated and consolidated basis, during the three most profitable years out of the immediately preceding five years.

  • Has a net worth of at least INR10 million in each of the preceding three full years.

  • An aggregate of the proposed issue and all previous issues made in the same financial year (in terms of issue size) does not exceed five times the issuer's pre-issue net worth according to the audited balance sheet of the preceding financial year.

  • If it has changed its name within the last year, at least 50% of the revenue has been earned from the activity indicated by the new name.

If a company fulfils the above conditions then undertaking a book-built issue will be optional for that company. However, the trend is that even in cases where it is optional, the issuers opt for book-built issues.

In the case of a voluntary book-built issue, the allocation in the net offer to the public category must be as follows:

  • Not less than 35% to retail individual investors.

  • Not less than 15% to non-institutional investors.

  • Not more than 50% to qualified institutional buyers (QIBs), 5% of which must be allocated to mutual funds.

In a compulsory book-built issue, the allocation in the net offer to the public category must be as follows:

  • Not more than 10% to retail individual investors.

  • Not more than 15% to non-institutional investors.

  • Not less than 75% to QIBs, 5% of which must be allocated to mutual funds.

When an issue is book-built, the price for the entire offering is determined through the bookbuilding process. This price is the same for all categories of investors, whether retail or institutional.

Once the bidding process in a book-built issue is over, the final price is arrived at and the basis of allotment is finalised. After the finalisation of the basis of allotment, the securities are allotted and where the minimum subscription level is not achieved, the refund process is initiated.

 

Underwriting: equity offering

17. How is the underwriting for an equity offering typically structured? What are the key terms of the underwriting agreement and what is a typical underwriting fee and/or commission?

Under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR Regulations), while underwriting in the case of a fixed price IPO is optional, a book-built IPO must be mandatorily underwritten. However, the Indian concept of underwriting is essentially "soft" underwriting (that is, when an underwriter agrees to purchase the securities after finalisation of the pricing). The issuer enters into an underwriting agreement with the underwriters (that is, the merchant bankers and the syndicate members) after the closure of the issue. The underwriting obligation comes into effect only in the case of a prospective investor having failed to have honoured the commitment that it made at the outset. If the other syndicate members fail to fulfil their underwriting obligations, the lead merchant banker is required to fulfil the underwriting obligation. It is pertinent to note that the portion that must be compulsorily allotted to qualified institutional buyers (that is, at least 75% of the net offer to the public) as part of the eligibility criteria under Regulation 26(2) of the ICDR Regulations cannot be underwritten.

If the issue is successfully subscribed, an underwriting obligation does not arise. This is distinct from the "hard" underwriting that has traditionally been practiced in the United States and certain Asian finance-hubs. The underwriting fees and commission are typically factored into the fees that are charged by merchant bankers, which range from between 1% to 2% of the aggregate issue size.

 

Timetable: equity offerings

18. What is the timetable for a typical equity offering? Does it differ for an IPO?

In India, a typical equity public offering is an IPO. An IPO is a time consuming process given the regulatory requirements that an issuer must fulfil before the actual listing takes place. An IPO may take around six to 12 months from the date the company decides to undertake an IPO. Once the issue opens listing must take place within six days of the issue closing date.

 

Stabilisation

19. Are there rules on price stabilisation and market manipulation in connection with an equity offering?

The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 provides for a green shoe option as a mechanism for price stabilisation during an IPO. Under this option, a company over-allots shares to investors participating in the issue, with a view to have the merchant banker buy them back from the open market after listing. The objective of this mechanism is to reassure investors that they would have an exit available during the first 30 days after the listing of shares at a price close to the issue price, due to the price stabilising activity of the merchant banks.

The Securities and Exchange Board of India has made regulations for the prevention of market manipulation under the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Market) Regulations, 2003 (Unfair Trade Regulations), which prohibits any person from using any manipulative or deceptive device for the procurement of any securities or sale of securities of a company.

 

Tax: equity issues

20. What are the main tax issues when issuing and listing equity securities?

Apart from the stamp duty payable on the issue of securities, there are no other tax issues when securities are issued and listed in India.

 

Continuing obligations

21. What are the main areas of continuing obligations applicable to listed companies and the legislation that applies?

Before the introduction of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), entities that sought to list their specified securities on a recognised stock exchange would enter into a listing agreement with the stock exchange, and covenant to comply with the conditions laid out in that agreement. Compliance with the listing agreements was monitored by the stock exchanges, with regulatory oversight being provided by the Securities and Exchange Board of India (SEBI). However, with a view to harmonise the existing post-listing compliance framework and to develop a set of comprehensive regulations for various types of listed securities, the SEBI notified the Listing Regulations in September 2015. The Listing Regulations are applicable to all listed entities which have listed equity shares, non-convertible redeemable preference shares, IDRs or securitised debt instruments on a recognised stock exchange. Furthermore, a significantly shortened "uniform" listing agreement has been prescribed under the regulations.

The Listing Regulations provide a set of broad principles that are in line with International Organisation of Securities Commissions (IOSCO) principles for periodic disclosures and also incorporate the principles for corporate governance in line with Organisation for Economic Co-operation and Development (OECD) principles. Further, they prescribe certain common obligations that are applicable to all listed entities, such as:

  • Appointment of a compliance officer and share transfer agent.

  • Co-operation with the SEBI-registered intermediaries.

  • Preservation of documents.

  • Technological infrastructure.

  • Grievance redressal mechanism.

Entities that have listed their equity shares on a recognised stock exchange are required to comply with the following critical obligations, among other things.

Corporate governance

The board of directors should have an optimum combination of executive and non-executive directors, with at least one woman director. Further, whilst not less than half the board must comprise non-executive directors, not less than one-third must comprise independent directors. Should the chairman of the board be an executive director, a promoter or a person related to a promoter, then at least half the board must comprise independent directors. Further, the Listing Regulations prescribe the composition requirements and terms of reference of certain critical corporate governance committees, such as the:

  • Audit committee.

  • Nomination and remuneration committee.

  • Stakeholders' relationship committee.

  • Corporate social responsibility committee.

  • Risk management committee.

Related party transactions

The Listing Regulations prescribe the formulation of a policy on materiality and dealing with related party transactions, whilst also prescribing prior mandatory approval of the audit committee. Further, all material related party transactions require an approval of the non-interested shareholders (that is, a resolution upon which the related parties are required to refrain from voting on).

Periodic reporting

The listed entity is required to make a number of filings with the stock exchanges on a periodic basis. These include submitting:

  • A quarterly compliance report on corporate governance within 15 days from the end of each quarter.

  • A statement giving a status of investor complaints within 21 days from the end of each quarter.

  • Quarterly and year-to-date financial results (includes the income statement and balance sheet in a prescribed format) within 45 days from the end of each quarter (other than the last quarter), along with a limited review report or audit report, as applicable.

  • A compliance certificate certifying the maintenance of a physical and electronic transfer facility, within one month of the end of each half of the financial year.

  • Audited standalone financial results (along with audited consolidated financial results if the entity has any subsidiaries) for the financial year, within 60 days from the end of the financial year, along with an audit report.

  • An annual report within 21 working days of it being approved and adopted in the annual general meeting under the provisions of the Companies Act, 2013.

Further, under the provisions of Regulation 55A of the SEBI (Depositories and Participants) Regulations, 1996, listed companies must submit a "reconciliation of share capital audit report" on a quarterly basis to the stock exchanges for the purpose of reconciliation of the share capital held in depositories and in physical form with the issued/listed capital.

Other compliance requirements

The Listing Regulations also prescribe certain other disclosures that must be made before the occurrence of, or upon the occurrence of, certain events, such as board meetings for discussing certain prescribed matters, voting results and price-sensitive information.

 
22. Do the continuing obligations apply to listed foreign companies and to issuers of depositary receipts?

The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations) also are applicable to foreign companies that have listed Indian depository receipts (IDRs) on a recognised stock exchange in India. Therefore, the foreign company is required to promptly disclose all events which are material or information that is price sensitive. Further, it is required to submit an IDR holding pattern within 15 days of the end of each quarter, in the specified format.

However, the Listing Regulations are pragmatic as they enable a foreign company whose securities market regulator is a signatory to the Multilateral Memorandum of Understanding of International Organisation of Securities Commission to manage its affairs in accordance with the continuous disclosure/compliance requirements of its home country in a number of matters, such as periodical financial results, annual reports and corporate governance requirements. A foreign entity is also required to ensure that for all corporate actions, except those which are not permitted by Indian law, it treats IDR holders in a manner equitable with security holders in its home country.

 
23. What are the penalties for breaching the continuing obligations?

If a listed entity, or any other person within that listed entity, contravenes any of the provisions of the Listing Regulations, it is, in addition to being liable for an action in terms of the securities laws, liable for fines, suspension of trading, freezing of promoter/promoter group holding of designated securities, or any other action as may be specified by the Securities and Exchange Board of India (SEBI). To this end, the SEBI has notified a uniform fine structure for failure by listed companies to submit periodic reports, and a standard operating procedure for suspension of specified securities. Further, the stock exchanges, which are responsible for monitoring compliance by listed entities with the provisions of the Listing Regulations, are required to disclose on their websites details of the action taken by them against instances of non-compliance.

 

Market abuse and insider dealing

24. What are the restrictions on market abuse and insider dealing?

Restrictions on market abuse/insider dealing

The Securities and Exchange Board of India has made regulations for the prevention of market manipulation under the Securities and Exchange Board of India (Prohibition of Fraudulent and Unfair Trade Practices Relating to Market) Regulations, 2003 (Unfair Trade Regulations), which prohibit any person from using any manipulative or deceptive device for the procurement of any securities or sale of securities of a company. The Unfair Trade Regulations define the term "fraud" as an act/omission or concealment in a dishonest manner in order to persuade any other person to deal in securities, whether or not for gain or loss, which may result in market abuse.

Insider dealing in India is governed by the SEBI (Prohibition of Insider Trading) Regulations, 2015 (Insider Trading Regulations), which lays down the framework within which insiders can communicate information and deal in securities. An "insider" (of a company) is prohibited from communicating, providing or allowing access to any unpublished information relating to the company or its securities, to any person (including other insiders) except where such communication is in furtherance of legitimate purposes, performance of duties or discharge of legal obligations. Additionally, an insider who is a "connected person", or a person who is in possession of, or has access to, unpublished price sensitive information about the company, is prohibited from communicating the same to any other person to enable trading in the securities of the company. The Insider Trading Regulations define the following terms:

  • An "insider" as any person who is a connected person, or is in possession of, or has access to, unpublished price sensitive information.

  • "Trading" as the act of subscribing, buying, selling, dealing or agreeing to subscribe to securities of a company.

  • A "connected person" as a person who is associated with the company, directly or indirectly, through frequent communication with officers of the company and has access to unpublished price sensitive information, and can be an immediate relative of a connected person, or a holding company or a subsidiary company.

Penalties for market abuse/insider dealing

If any person indulges in fraudulent and unfair trade practices or insider trading then he will be liable for a penalty of INR2.5 million or three times the profits made out of insider trading, whichever is higher. Further, if the person is found to have abetted, contravened or even attempted to have contravened the provisions relating to fraudulent and unfair trade practices or insider trading, then he may also be punished with imprisonment up to a maximum term of years.

Further, under the Unfair Trade Regulations, in the event that SEBI has a reasonable ground to believe that provisions relating to the Unfair Trade Regulations have been contravened, it can take the following actions, either pending investigation or enquiry, or on completion of such investigation or enquiry:

  • Suspend the trade of the security found to be, or prima facie found to be, involved in fraudulent and unfair trade practice in a recognised stock exchange.

  • Restrain persons from accessing the securities market and forbid any person associated with the securities market to buy, sell or deal in securities.

  • Suspend any office-bearer of any stock exchange or self-regulatory organisation from holding said position.

  • Impound and retain the proceeds or securities in respect of any transaction which is in violation, or prima facie in violation, of the Unfair Trade Regulations.

  • Direct an intermediary or any person associated with the securities market in any manner not to dispose of or alienate an asset forming part of a fraudulent and unfair transaction.

  • Require the person concerned to call upon any of its officers, other employees or representatives to refrain from dealing in securities in any particular manner.

  • Prohibit the person concerned from disposing of any of the securities acquired in contravention of the Unfair Trade Regulations.

  • Direct the person concerned to dispose of any such securities acquired, in contravention of Unfair Trade Regulations, to restore the status quo.

 

De-listing

25. When can a company be de-listed?

A listed company can be de-listed either compulsorily by the stock exchange or through a voluntary de-listing process.

A stock exchange can compulsorily delist any securities listed on such stock exchange on any of the following grounds:

  • The company has incurred losses during the preceding three consecutive years and its net worth has become negative.

  • Trading in the securities of the company has remained suspended for a period of more than six months.

  • The securities of the company have remained infrequently traded during the preceding three years.

  • The company, or any of its promoters or any of its director, has been convicted for failure to comply with any of the provisions of the Securities Contracts Regulation Act, 1956, the Securities and Exchange Board of India (SEBI) Act, 1992 or the Depositories Act, 1996, or rules, regulations, agreements made under that legislation, and has been awarded a penalty of not less than INR10 million or imprisonment of not less than three years.

  • The addresses of the company, or any of its promoter or any of its directors, are not known, or false addresses have been furnished, or the company has changed its registered office in contravention of the provisions of the Companies Act, 2013.

  • The shareholding of the company held by the public has fallen below the minimum level applicable to the company under the listing agreement and the company has failed to raise public holding to the required level within the time specified by the stock exchange.

If the securities are de-listed compulsorily then the company and its promoters and directors are jointly and severally liable to purchase, at a fair price determined in accordance with regulations made by the SEBI, all of the outstanding securities from those holders who wish to sell.

A voluntary de-listing can be one of two types:

  • First, where the listed company chooses to de-list from one stock exchange while being listed on others.

  • Second, where the listed company decides to de-list from all the stock exchanges on which its securities are listed.

A stock exchange can, on the request of the company, delist any of its securities listed on such stock exchange subject to the following conditions:

  • The securities of the company have been listed for a minimum period of three years on the stock exchange.

  • The de-listing of such securities has been approved by the two-thirds of the public shareholders of the company.

  • The company, its promoter and/or its director purchase the outstanding securities from those holders who wish to sell them at a price determined in accordance with regulations made by the SEBI. This condition can be dispensed with by the SEBI if the securities remain listed at least on the NSE or the BSE.

 

Reform

26. Are there any proposals for reform of equity capital markets/exchanges? Are these proposals likely to come into force and, if so, when?

In recent times, the Government of India has been taking conscious steps to increase investor confidence and improve the ease of doing business in India. The revised depository receipts scheme and the framework for the introduction of "masala" bonds are indicative of this intent. Last year, the SEBI has made an unprecedented number of amendments to the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 with a view to addressing some of its alleged shortcomings. These include a mechanism for the listing of start-ups, revised format of the abridged offer document and reduced post-issue timelines, amongst others.

Furthermore, the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 have ushered in a new era with respect to continuous compliance requirements, and their overall impact will only be revealed in the days to come. With the advent of industry specific regulations that are intended to facilitate the development of infrastructure investment trusts and real estate investment trusts, which are commonplace in developed economies, it appears that the SEBI is taking steps in the right direction. However, the SEBI's haste in wanting to introduce market reforms is clearly reflected in the various discussion papers that is has released in recent times in relation to the declassification of promoters, developing a bright line test for control, developing the market for public offer of convertible securities, and so on. At this juncture, it may be necessary for the regulator to proceed with caution, as too much change in too short a time-span may not only create more confusion than it seeks to dispel, but also result in the erosion of the confidence of market participants.

 

Online resources

Securities and Exchange Board of India (SEBI)

W www.sebi.gov.in

Description. This website is the official website of SEBI and all notifications, regulations, circulars, and a list of debarred entities are available on this website.

Ministry of Corporate Affairs, Government of India

W www.mca.gov.in

Description. Maintained by the Ministry of Corporate Affairs and the Companies Act, 2013, various rules, amendments and notifications are available on this website.

BSE Limited (BSE)

W www.bseindia.com

Description. Maintained by the BSE, trading data, eligibility criteria and membership information is available on this website.

National Stock Exchange of India Limited (NSE)

W www.nseindia.com

Description. Maintained by the NSE, trading data, eligibility criteria and membership information is available on this website.



Contributor profiles

Rohitashwa Prasad, Partner

J. Sagar Associates

T + 91 124 439 0661

F +91 124 4390 617
E rprasad@jsalaw.com
W www.jsalaw.com

Professional qualifications. New York and India.

Areas of practice. Capital markets; mergers & acquisitions

Recent transactions

  • Advised Sistema Shyam Teleservices Limited (SSTL) and its majority shareholder Sistema JSFC, a leading Russian conglomerate (Sistema) in connection with the demerger of SSTL's telecom wireless business operated under MTS brand to Reliance Communications Limited (RCOM) in exchange for 10% of the issued and paid up capital of RCOM.

  • Company's counsel for the initial public offering of InterGlobe Aviation Limited

Languages. English, Hindi

Arka Mookerjee, Partner

J. Sagar Associates

T + 91 22 4341 8593
F +91 22 4341 8616
E arka@jsalaw.com
W www.jsalaw.com

Professional qualifications. India

Areas of practice. Capital markets; mergers & acquisitions

Languages. English, Hindi, Bengali

Nidhi Sahay, Partner

J. Sagar Associates

T + 91 124 439 0725
F +91 124 4390 617
E nidhi.sahay@jsalaw.com
W www.jsalaw.com

Professional qualifications. New York and India

Areas of practice. Capital markets; mergers & acquisitions

Recent transactions

  • Advised Sistema Shyam Teleservices Limited (SSTL) and its majority shareholder Sistema JSFC, a leading Russian conglomerate (Sistema) in connection with the demerger of SSTL's telecom wireless business operated under MTS brand to Reliance Communications Limited (RCOM) in exchange for 10% of the issued and paid up capital of RCOM.

  • Company's counsel for the initial public offering of InterGlobe Aviation Limited.

Languages. English, Hindi


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