The last week has witnessed tighter financial regulations emerging out of the U.S. and European markets. While some of the reforms are expected to result in migration of investments into more liberal markets in Asia (including India), others represent introduction of stringent measures that are already in place in India. Possible Regulatory Arbitrage First, the European Union finance ministers...
Do Auctions in Public Offerings Work?
The SEBI (Issue of Capital and Disclosure) Regulations, 2009 were recently amended to provide for “French” auction as one of the methods of price discovery in follow-on public offerings. This was supposedly brought about with a view to encourage the use of such auction mechanism in Government disinvestments. However, the results emanating from the first offering where the auction mechanism was...
Newer Pricing Options in Public Offerings
A couple of months ago, SEBI permitted companies undertaking follow-on public offerings (FPOs) to price their shares freely above a floor price and on the basis of the price the bidders have quoted. However, retail investors would be allotted shares at the floor price. This was also in preparation for a slew of offerings by public sector undertakings (PSUs). The Hindu Business Line reports that...
Compensating Investors: IPO Irregularities
SEBI has recently published a report by the Justice D.P. Wadhwa Committee in connection with irregularities in various IPOs in 2005. The report itself was, however, submitted by the Committee to SEBI as early as December 2007. In those IPOs, certain applications were made by certain persons using fictitious demat and bank accounts in the retail quota “so as to corner shares by using the...
A Round-up on Recent SEBI Reforms
Earlier this week, SEBI announced a slew of capital market reforms. This comes in the wake of recovery in the markets as well as the Government’s intention to undertake disinvestments in public sector undertakings (PSU). The principal reforms and their impact are discussed below. Small and Medium Enterprises (SMEs)SEBI has established a separate regime for listings by SMEs. Companies listing on...
Corporate Bonds: Clearing and Settlement
SEBI last week issued a circular prescribing the procedure for clearing and settlement of corporate bonds. This is an important step in the development of a robust corporate bond market that has not yet fully evolved in India, and appears to have been welcomed by the markets.
The SEBI Updates blog has a post describing the history of regulation of the Indian corporate bond markets.
The Legal Aspects of Dual Listings
There has recently been a fair amount of discussion regarding the ability of companies to carry out dual listings in India. This arises in the context of dual listing as a possible structure being considered in the Bharti-MTN transaction. Generally, dual listings occur when two or more companies (that otherwise intend to merge) continue as separate entities with separate sets of shareholders, but...
Norms on Minimum Public Float Set to Become Reality
In a post over a year ago, we had discussed that several companies were listed with differing minimum public shareholding in the past due to varying rules regarding minimum public float. These discrepancies continue to date. In order to obviate them, the Ministry of Finance had proposed imposing a uniform public float of 25%. This was also alluded to in the Budget this year. The Economic Times...
Lead Managers, Bond Issues and Taxes
Previous posts have examined the scope of Indian taxation of fees for technical services that are paid to non-residents. This is an increasingly common commercial practice, especially in the context of issuing shares or bonds abroad. An interesting issue that has arisen recently before the Bombay ITAT is whether Indian companies that make use of this service are liable to make provision for TDS...
Prospects for Recovery of Capital Markets
Now that green shoots are visible in the Indian markets with some encouragement from the formation of the new Government, there is an expectation that capital markets are poised for recovery. There seems to be a steady flow of foreign capital into the Indian markets, and Indian companies too seem to be raising capital, albeit from institutional sources. If the trend were to continue, there could...
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