Indian Capital Markets: Legal Milestones Financial Year 2020-21 And A Look Ahead

THE YEAR THAT WAS

The COVID-19 pandemic resulted in a significant slowdown in Indian capital markets in the year 2020. While the total number of initial public offerings (IPOs) in 2020 was comparatively lesser than in 2019, the capital raised through these IPOs was higher than that raised through IPOs in 2019. Companies such as SBI Cards and Payments Services, Computer Age Management Services, Burger King, and Mrs. Bectors Food Specialties undertook highly oversubscribed IPOs in 2020.

With the pandemic having an adverse impact on the global economy and lockdowns imposed by the Indian government to tackle the spread of the virus disrupting normal business, the Securities and Exchange Board of India (SEBI) introduced various measures in 2020 targeted at providing companies with relaxations from various compliance and disclosure burdens and facilitating fundraising for cash-strapped companies.

MAJOR DEVELOPMENTS IN THE FINANCIAL YEAR 2020-2021

• Relaxation of Pricing Guidelines and Open Offer Obligations for Preferential Issue by Companies Having Stressed Assets and Introduction of a Temporary Alternate Pricing Option

  To enable better access to capital markets by companies having stressed assets, SEBI liberalised regulations governing preferential issues by such companies, by relaxing pricing guidelines under the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (ICDR Regulations) and open offer obligations under the SEBI (Substantial Acquisitions of Shares and Takeovers) Regulations, 2011 (Takeover Code).

  For issuer companies meeting the eligibility criteria of a ‘stressed issuer‘, the pricing of equity shares has been reduced from the higher of, the average weekly high and low of the volume-weighted average price during 26 weeks or 2 weeks preceding the relevant date, to at least the average weekly high and low of the volume-weighted average price during the 2 weeks preceding the relevant date. SEBI also amended the Takeover Code exempting any acquisition of shares or voting rights in a preferential issue by issuers in compliance with the pricing framework applicable to ‘stressed issuers’, from the obligation to make an open offer under the Takeover Code.

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