India: Update On India

The last few months have seen a number of developments in the foreign investment regime for India, and for transaction in respect of Indian listed companies, including the introduction of the new Indian takeover code. We set out below a summary of some of their more salient aspects. 

FDI Policy Revised

The Indian Department of Industrial Policy and Promotion (DIPP) had previously issued the fourth edition of the Consolidated Foreign Direct Investment (FDI) Policy (the "Policy") or Circular 2 of 2011. The Policy has now entered into effect and includes a number of significant changes, including:

  • The consolidation of recent changes such as:
    • allowing FDI in Limited Liability Partnerships (subject to specified conditions),
    • allowing AD Category – I banks (AD Banks) to open and maintain non-interest bearing escrow accounts in Indian rupees without prior approval of the Reserve Bank of India,
    • permitting promoters of Indian companies that have issued external commercial borrowing to pledge the shares of the borrowing company/its associated resident companies to secure such borrowing – which should facilitate foreign lending to Indian companies;
    • a clarification that whenever there is a requirement of minimum capitalisation, "share premium" would be included within the meaning of minimum capitalisation when received by the company against issue of shares.
  • Changes to the sectoral policy including:
    • construction and development activities in the education and old age/retirement sectors,
    • basic and applied R&D on biotechnology pharmaceutical/life sciences included within the scope of "industrial activity" under industrial parks for which 100% FDI under automatic route is allowed, and
    • 26% foreign investment allowed in terrestrial broadcasting/FM radio as compared with the earlier 20%

Some of the new wording creates the potential for uncertainty, and advice should therefore be sought on its application to specific transactions.  It may be appropriate to seek clarification from DIPP in some cases.

New Takeover Code

The Securities and Exchange Board of India (Substantial Acquisitions of Shares and Takeovers) Regulations 2011 (the "New Code") has now been notified by the Securities and Exchange Board of India and is in force.

The New Code is based on the recommendations of the Takeover Regulations Advisory Committee. Some of the significant changes that the New Takeover Code introduced include:

  • Threshold limit: Acquisitions of 25% or more in the target Indian listed company (the "Target") will now trigger the open offer requirements of the Takeover Code.
  • Triggered offer size: Open offers made pursuant to a substantial acquisition of the Target would have to be for [at least] 26% of the Target's share capital.
  • Voluntary offers: Offers that are not triggered by an acquisition are to be made for a minimum of 10% of the total share capital of the company but are capped at 75%.
  • Creeping up to 75%: 5% consolidation of shareholding in a financial year (on gross basis) is to be allowed up to 75% for shareholders holding 25%.
  • Effecting the agreement: Execution of the terms of the agreement triggering the open offer will be allowed after expiry of 21 working days, if 100% of the consideration payable pursuant to the offer is deposited in escrow.
  • Timeline: A short public announcement is to be made on date of entering into agreement. The overall timeline would be substantially reduced.
  • Competitive offers: Competitive offers have to be made within 15 days of the detailed public statement.
  • Change in Control: The only route now available for change in management and control is through an open offer to the shareholders of the Target.
  • Exemptions relating to rights issues:  Exemptions are provided from open offer requirements in case of acquisition of shares of the Target upon a shareholder subscribing to shares up to their entitlement in a rights issue.
  • Mode of payment: Clarity has been provided on the use of securities as an alternate mode of payment of consideration.
  • Indirect acquisitions: Separate announcement and pricing requirements have been specified for indirect acquisitions (but note, in certain circumstances, an indirect acquisition can be regarded as a direct acquisition).
  • Non-compete fee: Payment of a non-compete fee to promoters is now disallowed.
  • Target Company obligations: The provision of  a reasoned recommendation on the open offer to the Targets' shareholders by a committee of independent directors is now mandatory.
    Delisting Offer: No voluntary delisting offer is permissible for 12 months from date of open offer pursuant to which maximum permissible non-public shareholding was breached.

SEBI (Issue of Capital and Disclosure Requirements) (Second Amendment) Regulations 2009

The Securities and Exchange Board of India (SEBI) pursuant to the notification dated 23 September 2011 has issued the SEBI (Issue of Capital and Disclosure Requirements) (Second Amendment) Regulations, 2009 (Amendment).

The Amendment has introduced a number of changes to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR) that include:

The deletion to the provisions relating to a 10% minimum dilution of the paid up share capital to the public.

  • Changes to the eligibility criteria.
  • The introduction of a legal framework allowing for a rights issue of Indian Depository Receipts (IDR).
  • Allowing an issuer company to issue IDRs through rights basis on a fast track mechanism.
  • Changes to the requirements for disclosures in an abridged prospectus.

The introduction of disclosures to be made in the offer document and the abridged offer document in the case of a rights issue of IDRs.

The changes to the FDI Policy do show a willingness of the Indian Government to seek to further open up their economy to international investors.

FDI in single brand retail trading

Separately, following months of speculation, the DIPP has now permitted 100% FDI in single brand retail trading, subject to conditions including that:

  • the relevant products should be of a "single brand", and sold under the same brand internationally;
  • the foreign investor should be the owner of the brand; and
  • where the investment exceeds 51%, compliance with mandatory Indian sourcing requirements. 

This is a significant change to the investment regime for the Indian retail sector, which until now has been confined to wholesale cash and carry distribution in India, but is subject to strict conditions.  

We are very grateful to Khaitan & Co, the leading Indian law firm with offices in Mumbai, New Delhi, Kolkata and Bangalore, for allowing us to use their newsletters to prepare this briefing note.

This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to

Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.

The original publication date for this article was 19/01/2012.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions