General Newsletter, April 2025

CAPITAL MARKET

ON MARCH 3, 2025, THE SECURITIES AND EXCHANGE BOARD OF INDIA ("SEBI") VIDE CIRCULAR NO. SEBI/LADNRO/GN/2025/233 INTRODUCED THE SEBI (ISSUE OF CAPITAL AND DISCLOSURE REQUIREMENTS) (AMENDMENT) REGULATIONS, 2025, ("SEBI ICDR REGULATIONS"). THE KEY AMENDMENTS ARE HIGHLIGHTED BELOW:

1. The amendments introduced revised promoter lock-in requirements, which now reflect the actual use of issue proceeds. If the majority of fresh issue proceeds are intended for capital expenditure or related debt repayment, promoters must retain their minimum contribution for three years. In other cases, the lock-in period remains 18 months. Additionally, for excess promoter holdings related to capital expenditure, the lock-in period has been extended from six months to one year.
2. SEBI has also updated the timeline for public announcements. After the filing of the draft offer document, issuers are now required to make a public announcement within two working days. The previous requirement for separate pre-issue and price band advertisements has been consolidated into one advertisement, which must be published at least two working days before the issue opens. The draft document will now remain open for public comments for 21 days following this announcement.
3. Despite streamlining procedures, SEBI has added further transparency requirements. Regulation 71 of SEBI ICDR Regulations specifies the documents to be submitted to the stock exchange, including the draft letter of offer and details of the promoters (e.g., Permanent Account Number (PAN), bank and passport details for individuals, or company registration data for corporate promoters). For convertible debt instruments, issuers must provide a due diligence certificate from the debenture trustee. The final letter of offer must be filed with both SEBI and the exchanges, with SEBI responsible for its public dissemination.
4. A notable addition has been made to SEBI ICDR Regulations (Regulation 77B), which allows promoters to renounce their rights entitlements in favor of specific investors. These investors must apply by 11:00 A.M. on the first day of the issue, and the issuer must notify the stock exchange by 11:30 A.M. Issuers may also allocate any under-subscribed portions of the issue to such investors, provided this intention is clearly stated in the letter of offer and advertisements. This change provides issuers with more strategic flexibility while maintaining necessary disclosure safeguards.
5. To prevent potential misuse of the simplified framework, SEBI has introduced a safeguard under Regulation 61(d) of SEBI ICDR Regulations, barring Issuers whose equity shares are under disciplinary suspension from making rights issues.
6. SEBI has also tightened timelines for rights issues. According to Circular No. SEBI/HO/CFD/CFD-PoD1/P/CIR/2025/31, issued on March 11, 2025, the entire rights issue process must now be completed within 23 working days from board approval. This replaces the previous flexible schedule and provides greater clarity for investors.
7. SEBI has removed the INR 50 Cr threshold that previously determined when SEBI ICDR norms applied. Now, all rights issues by listed companies must adhere to SEBI ICDR regulations, regardless of the issue size This change ensures consistent disclosure and compliance requirements across the market.
8. The process for documenting and approving rights issues has also been made more efficient. Issuers are no longer required to file the draft letter of offer with SEBI; instead, it must be filed directly with the relevant stock exchanges, eliminating delays while still ensuring investor access via exchange platforms. Additionally, the requirement to appoint a merchant banker has been removed under the revised Regulation 69 of SEBI ICDR Regulations. Now, responsibilities such as regulatory compliance and allotment facilitation are shared among the Issuer, Registrar, and Exchanges.
9. SEBI has focused on enhancing pre-issue and pre-IPO transparency. Amendments to Regulations 54 and 95 of SEBI ICDR Regulations now require Issuers to report any securities transactions by promoters and promoter groups within 24 hours of occurrence, from the date of filing the draft offer document until the closure of the issue. Additionally, any pre-IPO placements disclosed in the draft documents must be reported to stock exchanges within 24 hours of the transaction.
10. As per Regulation 127(4) of SEBI ICDR Regulations the Issuer must announce the floor price or price band at least two working days before the bidding opens. This should be done in a pre-issue advertisement and a price band advertisement, using the format provided in Part A of Schedule X of the SEBI ICDR Regulations. These advertisements must be published in the same newspapers where the public announcement (as per Regulation 124(2)) of SEBI ICDR Regulations is made.
11. As per Regulation 139(1) of SEBI ICDR Regulations after the Issuer files the red herring prospectus (for bookbuilt issues) or prospectus (for fixed-price issues) with the Registrar of Companies, they must publish a preissue and price band advertisement. This advertisement should appear in the same newspapers where the public announcement (as per Regulation 124(2)) of SEBI ICDR Regulations was published.
12. As per Regulation 229 of SEBI ICDR Regulations following are the conditions under which an issuer can make an initial public offer (IPO):
    For Issuers converted to a Company:
    
    
    • If the issuer was previously a proprietorship, partnership, or limited liability partnership (LLP) and later became a company, it can only make an IPO if the company has existed for at least one full financial year before filing the draft offer document.
    • The financial statements of the company after conversion must follow the rules in Schedule III of the Companies Act, 2013.
      Change of Promoters:
    • If there is a complete change of promoters or if new promoters acquire more than 50% of the shares in the company, the Issuer can only file the draft offer document one year after the final change of promoters.
      Minimum Operating Profits:
    • The Issuer can make an IPO only if the company has had operating profits (earnings before interest, depreciation, and tax) of at least ₹1 crore for two out of the last three financial years.
13. Regulation 14 of SEBI ICDR Regulations states that: If the promoters or controlling shareholders of a company change the company's objectives or vary the terms of the contracts mentioned in the offer document, they must provide an exit offer to shareholders who disagree (dissenting shareholders). This exit offer should be made according to the conditions and procedures outlined in Schedule XX of the Companies Act, 2013. It has been clarified that where there are no identifiable promoters or shareholders in control, the exit offer requirement shall not be applicable to the Issuer company.
14. The amendments require Issuers to disclose certain information to protect investors:
    Disclosure of Material Agreements: Issuers must disclose any important agreements that affect management control or create legal obligations.
    Criminal or Regulatory Issues: If key management personnel are involved in criminal proceedings or if any regulatory actions have been taken against them, this must also be disclosed.
    Civil Litigation: Issuers must disclose civil litigation if it meets SEBI's monetary thresholds, which are now aligned with the SEBI Listing Regulations. The threshold for disclosing pending litigation is based on the lower of the following:
    
    1. The policy of materiality defined by the issuer's board and disclosed in the offer document.
    2. The litigation where the value or expected impact is more than the lower of:
       • 2% of the issuer's turnover (based on the latest financial statements);
       • 2% of the issuer's net worth (based on the latest financial statements, unless the net worth is negative); and
       • 5% of the average profit or loss after tax for the last three years (based on the latest financial statements).

Additional Disclosure: The issuer must also disclose any criminal proceedings involving key management personnel or senior management, as well as any actions taken by regulatory or statutory authorities against them.

15. On the financial front, SEBI now allows voluntary disclosure of proforma financials related to recent acquisitions or divestments, even if they do not meet the materiality threshold. This change aims to give investors a clearer picture of a company's financial health, especially for those undergoing structural changes. The supporting documentation must be certified by the statutory auditor or a peer-reviewed chartered accountant.
16. Furthermore, issuers must provide more detailed information about employee benefit schemes, including Stock Appreciation Rights (SARs), in their IPO offer documents. Disclosures regarding standalone financials for working capital utilization must also be clarified, ensuring consistency between audited standalone and restated consolidated financials when adjustments are made

COMPETITION LAW

Following are the developments in the Competition law sphere for the month of March 2025:

CCI GREENLIGHTS MAJOR INDUSTRY CONSOLIDATION - STEEL, FOOD, AND TECH SECTORS SEE STRATEGIC MOVES

The Competition Commission of India (CCI), vide an order dated 10.12.2024, reshaped India's steel industry landscape by granting unanimous approval of 100% share capital of Thyssenkrupp Electrical Steel India Private Limited (Target) by Jsquare Electrical Steel Nashik Private Limited (Jsquare) under Section 31(1) of the Competition Act, 2002 (Act). The acquisition was pursuant to a Share Purchase Agreement executed between Jsquare, Thyssenkrupp Electrical Steel GmbH, and Thyssenkrupp Electrical Steel UGO S.A.S. on 18.10.2024.

Jsquare is a wholly owned subsidiary of JSW JFE Electrical Steel Private Limited, a joint venture between JSW Steel and JFE Steel Corporation. The Target is engaged in manufacturing Grain-Oriented Electrical Steel (GOES) in India. The CCI examined the horizontal overlap and potential vertical linkages arising from the combination, particularly in the context of JSW Steel's plans to manufacture GOES substrate in India. It was observed that the combination would facilitate domestic production of GOES, reducing reliance on imports, without raising anti-competitive concerns.

After assessing the market structure, competitive landscape, and other factors under Section 20(4) of the Act, the CCI concluded that the combination is not likely to cause any appreciable adverse effect on competition in India. Accordingly, the proposed transaction was approved.

CCI CLEARS MARS-KELLANOVA MERGER IN INDIA

CCI vide an order dated 31.12.2024, approved the acquisition of Kellanova (formerly Kellogg Company) by Acquiror 10VB8 LLC (Acquiror), a wholly owned subsidiary of Mars Incorporated (Mars). The transaction, structured through a merger agreement executed on 13 August 2024, involves Merger Sub 10VB8 LLC merging with and into Kellanova, thereby making Kellanova an indirectly wholly owned subsidiary of Mars. The regulatory filing was accompanied by three separate voting agreements with key stakeholders, including W.K. Kellogg Foundation Trust and KeyBank National Association.

After a detailed review of the proposed combination under the Competition Act, 2002, the CCI noted that the Acquiror, being a special purpose vehicle, has no independent business activities, while Mars is a global player in confectionery, food products, and pet care. Kellanova, on the other hand, operates in the snacks and convenience food segment, supplying products like breakfast cereals and potato crisps in India. The Commission examined the transaction for horizontal overlaps in the Indian snacks market and found that the combined market share of the parties remains within the [0-5] % range, with several other competitors such as Parle, Britannia, Mondelez, ITC, and Pepsi ensuring a competitive landscape.

Given the fragmented nature of the Indian snacks market and the negligible impact of the transaction on market competition, the CCI concluded that the proposed combination does not raise any appreciable adverse effect on competition. The approval is granted under Section 31(1) of the Competition Act, 2002, with a caveat that the order may be revoked if any information provided by the Acquiror is found to be incorrect.

CCI APPROVES LANDMARK PEGATRON ACQUISITION FOR APPLE SUPPLY CHAIN EXPANSION

CCI vide order dated 07.01.2025, has approved the acquisition of Pegatron Technology India Private Limited (Pegatron India) by Tata Electronics Private Limited (TEPL). The transaction, structured through a binding term sheet executed on 23 September 2024, involves TEPL acquiring up to 80% of Pegatron India's fully paid-up equity share capital in multiple tranches. Additionally, TEL Components Private Limited (TEL), a wholly owned subsidiary of TEPL, will transfer its business undertaking to Pegatron India.

Following an assessment under the Competition Act, 2002, the CCI noted that TEPL, a subsidiary of Tata Sons Private Limited, is engaged in manufacturing high-precision components, including smartphone enclosures, while Pegatron India provides electronic manufacturing services (EMS) for smartphones. The Commission examined the transaction for horizontal overlaps in the EMS market and potential vertical relationships in the smartphone enclosures supply chain. It found that the combined market share of TEPL (including subsidiaries) and Pegatron India in EMS for smartphones remains within the [5-15] % range, with the presence of multiple competitors ensuring market competition.

Considering the fragmented nature of the EMS market and the negligible risk of foreclosure in vertical segments, the CCI concluded that the proposed combination does not raise any appreciable adverse effect on competition. The approval is granted under Section 31(1) of the Competition Act, 2002, with a caveat that the order may be revoked if any information provided by the notifying parties is found to be incorrect. The CCI has also directed that all submitted information shall remain confidential as per Section 57 of the Act.

CCI APPROVES BLACKSTONE'S STRATEGIC INVESTMENT IN BAGNANE GROUP

CCI vide order dated 10.12.2024, has approved the acquisition of a 7% stake in Bagmane Developers Private Limited (BDPL) and Bagmane Rio Private Limited (BRPL) by BREP Asia III India Holding Co VIII Pte. Ltd. (BREP), an affiliate of funds advised or managed by Blackstone Inc. The transaction, structured through a Binding Framework Agreement executed on 31 October 2024, involves the purchase of equity securities in the Target Entities from Bagmane Realty and Infrastructure LLP.

Following an assessment under the Competition Act, 2002, the CCI noted that BREP, as part of Blackstone, is engaged in investment management, while the Target Entities operate in commercial real estate development, leasing, and maintenance, with additional involvement in hospitality and renewable power generation. The Commission examined the transaction for potential competitive concerns, considering horizontal overlaps in commercial real estate in Bengaluru and vertical linkages in hospitality and renewable energy sectors.

The CCI found that the combined market share of the parties in the commercial real estate segment in Bengaluru is in the [10-15] % range, with an incremental share of [0-5] %. Given that the Target Entities' hospitality projects are still under development and that their involvement in solar power generation is minimal, the Commission determined that the proposed combination would not significantly alter the competitive landscape in these sectors.

In light of these findings, the CCI concluded that the transaction does not raise any appreciable adverse effect on competition.

CCI CLEARS SAINT-GOBAIN'S FOSROC ACQUISITION WITH COMPETITION SAFEGUARDS

CCI vide order dated 26.11.2024 , has approved the acquisition of 100% of the issued share capital of Fosroc Top One Limited, Fosroc Top Two Limited, and Fosroc Supply Limited (collectively, "Target Entities") by Starcin Holding France SAS ("Starcin") from Fosroc Group Holdings Limited and JMH FZE. The proposed transaction was notified to the CCI under Section 6(2) of the Competition Act, 2002, pursuant to a Share Purchase Agreement executed between the parties.

Starcin is a wholly owned subsidiary of Saint-Gobain Weber France SAS, which is ultimately controlled by Compagnie de Saint-Gobain S.A. ("Saint-Gobain Group"), a multinational corporation engaged in the manufacturing and distribution of construction materials, including chemical-based solutions for infrastructure and industrial applications. The Saint-Gobain Group has a presence in multiple geographies, including India, through various subsidiaries engaged in glass, gypsum, adhesives, and performance plastics. The Target Entities are subsidiaries of Fosroc Group Holdings Limited and are engaged in the manufacture and supply of construction chemicals, including admixtures, waterproofing materials, grouts, mortars, sealants, adhesives, and industrial flooring solutions. The Target Entities operate in India and other international markets, catering to a wide range of customers in the construction and infrastructure sectors.

The CCI conducted a detailed competition assessment to examine the potential impact of the proposed combination on relevant markets. The primary area of overlap between Starcin (through its group entities) and the Target Entities pertains to chemical-based construction solutions, particularly in the admixtures and waterproofing segments. The combined market share of the parties in the chemicalbased admixtures segment in India falls within the [20-25]% range, with the Target Entities contributing an incremental market share of [5-10]%. In the concrete admixtures and cement admixtures segments, the post-transaction market share remains below [10] %, indicating limited impact on market concentration. The construction chemicals sector in India is characterized by the presence of multiple players, including large multinational corporations and domestic manufacturers, ensuring competitive pressure in the market.

The CCI also examined any potential vertical linkages or conglomerate effects arising from the transaction. Given that Starcin (through the Saint-Gobain Group) operates in adjacent but distinct segments of construction materials, the transaction does not raise significant foreclosure concerns or anti-competitive leveraging risks.

To view the full article click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.