IFLR 1000
The Guide to the World's Leading Financial Law Firms

India in the past year has seen a wave of activity in the capital markets spearheaded by marquee transactions such as the Coal India IPO, which was the largest to date in the country. Practitioners mention that the regulators are definitely looking to develop the debt capital markets and the bond market, though progress has been measured and gradual....

India in the past year has seen a wave of activity in the capital markets spearheaded by marquee transactions such as the Coal India IPO, which was the largest to date in the country. Practitioners mention that the regulators are definitely looking to develop the debt capital markets and the bond market, though progress has been measured and gradual. "The introduction of a credit default swap regime, which will be operational in October 2011, has been quite encouraging and could bode well for the secondary market," says one lawyer.

Infrastructure projects continue to demand massive funding as the government hopes to hit $1 trillion worth of spending in infrastructure development by 2012. Needless to say, foreign investors have been clamouring to get involved in this space. The most recent budget announcement in February 2011 has increased the cap placed on foreign institutional investors to invest corporate bonds of infrastructure companies. Though FDI equity caps have remained favourable for investors from abroad, the regulatory landscape has been an oft cited source of delay and hindrance for efficient infrastructure development. "Even for foreign investors who decide to take the longer term view of investing in such debt instruments with a lock-in of at least five years, once they see the regulatory hurdles, they immediately say forget it," laments a lawyer. The government is well aware of these obstacles and have formed new committees and undertaken measures to alleviate these roadblocks to success.

M&A activity in India has been frantic in the last year, with a wave of both inbound and outbound activity amid dramatic regulatory changes. The landmark transactions of Vedanta's acquisition of a stake in Cairn India and the Vodafone buyout of Essar's share in their joint venture have been particular standouts in this market....

M&A activity in India has been frantic in the last year, with a wave of both inbound and outbound activity amid dramatic regulatory changes. The landmark transactions of Vedanta's acquisition of a stake in Cairn India and the Vodafone buyout of Essar's share in their joint venture have been particular standouts in this market.

The merger control regulations were modified in June 2011, which now only requires transactions of a certain size and meeting certain thresholds to attain pre-approval from the Competition Commission of India. There is concern about the approval time and the delays it might cause for transactions, but the first pre-approval clearance under this regime had been attained for the Reliance - Bharti Axa merger in a very swift 18 days, so the outlook from the market remains optimistic.

A new set of takeover regulations are due to be officially proposed this year, with the changes due to have a particular impact on private equity investors. Practitioners in the country have met most of the changes with approval, though the formal regulations will need to be carefully examined before any conclusions can be made.

Changes to the FDI (foreign direct investment) policy in April 2011 have been highly encouraging for foreign investors. The removal of Press Note 1 now allows foreign joint venture partners to form new partnerships with domestic entities without needing a no-objection-certificate from previous partners. This will allow greater flexibility and opportunities for investors from abroad. The other notable change has been a clarification on utilising pricing or conversion formulas for convertible instruments. Whereas before, an upfront price would need to be stated, a stated formula can now be used for the convertible instrument, allowing performance based considerations for pricing and equity conversions at the time of exit for investors.

...