ArchiveJune 2008

The Impending FCCB Conundrum

Foreign currency convertible bonds (FCCBs) have been issued by Indian companies, whereby investors have the option to convert these debt instruments into equity. Such conversion would normally occur when the market price of equity shares at the time of conversion is higher than the conversion price. But, with the markets now moving in the wrong direction, it is unlikely that the FCCB holders will...

Differential Voting Rights: Some Further References

In earlier posts (here and here), this Blog had covered the issue of differential voting rights by Indian companies. A recent column by Srikanth Srinivas in the Business World examines the business rationale for the issuance of shares with differential voting rights and also the pros and cons of such instruments. The key objectives that companies seek to achieve through shares with differential...

Research Paper: Achieving India’s Growth Potential

Just as the Indian economy reels from its double-digit inflation to the tune of approximately 11%, Goldman Sachs, the leading investment bank, has issued its latest research paper titled Ten Things for India to Achieve its 2050 Potential. This is part of a series of papers published over the last few years by Goldman Sachs covering the BRIC economies of Brazil, Russia, India and China. The paper...

Creating Debt and Securitisation Markets in India

One of the constant criticisms of the Indian financial markets has been the lack of a liquid and vibrant market for debt securities on the one hand and that for securitised instruments on the other. In separate moves announced on the same day (June 19, 2008), SEBI has sought to alleviate both these concerns. Debt Securities The SEBI (Issue and Listing of Debt Securities) Regulations, 2008 sets up...

CSX/TCI Judgment – Some Thoughts on the SEBI Takeover Regulations

In a closely followed case, the U.S. District Court for the Southern District of New York issued its decision regarding the reporting requirements of a hedge fund (TCI) that had entered into “total return equity swaps” with counterparties in respect of the shares of CSX. Although TCI only entered into cash-settled swaps (without any obligations to obtain delivery of CSX’s shares), the...

Oil Price Rise: Shareholders vs. Consumers

The spike in the price of oil has created a peculiar situation for the Indian oil companies that are in the public sector. These public sector undertakings (PSUs) are predominantly owned by the Government, with a portion of the shares (usually a minority) held by public shareholders. The shares of these entities are listed on stock exchanges, which subject them to norms of corporate governance...

The Proper Purpose of a Corporation

One of the themes that we often explore on this Blog relates to the determination of the proper purpose of a corporation – i.e. whether a corporation exists solely to carry on business for the benefit of its owners (i.e. shareholders), or whether it has a larger responsibility towards other stakeholders and generally the society. The Harvard Corporate Governance Blog has a post referring to...

FDI: Reporting Under Automatic Route

Whenever foreign investors subscribe to an issue of shares by an Indian company, there are certain reporting requirements that need to be complied with. In terms of the Foreign Exchange Management (Transfer or Issue of Security by a Person Resident Outside India) Regulations, 2000, the reporting obligations arise at two stages: (i) within 30 days of receipt by the amount of consideration by the...

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