19 April 2024

Critical Changes In FDI, Competition Law, SEBI's New Guidelines, Direct Listing Provisions, And RBI Clarifications On AIF Investments.

K Singhania & Co


K Singhania & Co logo
Singhania & Co is a boutique law firm with DNA in both transactional and litigation, having expertise and knowledge of over twenty five years. The Firm is recognized in advising foreign and domestic companies in matters relating to Arbitration, Foreign investments (inward & outward), Trademark, Maritime and Aviation law.
India's Union Cabinet recently approved a significant amendment to the Foreign Direct Investment (FDI) Policy, aiming to open up the country's space sector to foreign participation.
India Government, Public Sector
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India Opens Space Sector for Foreign Investment

India's Union Cabinet recently approved a significant amendment to the Foreign Direct Investment (FDI) Policy, aiming to open up the country's space sector to foreign participation. This update analyzes the implications of the FDI Amendment and its potential impact on India's space industry.

FDI Amendment Overview

The FDI Amendment defines three distinct categories of space activities with varying foreign investment limits:

  1. up to 49% under the automatic route for launch vehicles and associated systems or subsystems, and creation of spaceports for launching and receiving spacecraft;
  2. up to 74% under the automatic route for satellite manufacturing and operation, satellite data products, and ground segment and user segment; and
  3. up to 100% under the automatic route for manufacturing of components and systems/sub-systems for satellites, ground segment, and user segment.

With respect to (i) and (ii), investments beyond the specified thresholds will continue to require government approval.

Key Points Ambiguities Resolved:

The FDI Amendment removes ambiguities by defining specific categories as mentioned above within the space industry, facilitating clearer investment guidelines. However, existing investments in previously undefined sectors may face restructuring challenges.

Automatic Route Benefits: Investments under the automatic route eliminate delays associated with government approvals, fostering quicker investment timelines and reducing bureaucratic hurdles.

National Security Concerns: The FDI Amendment addresses national security concerns by imposing restrictions on certain sectors, such as satellite launches while encouraging foreign investment in satellite component manufacturing to promote the Make in India initiative.

Boost to Investments: The FDI Amendment aligns with government initiatives aimed at boosting investments in the space sector, such as opening up the sector to private participation, releasing the Indian Space Policy 2023, and introducing the Telecommunications Act, 2023.


India's space sector, renowned for its cost-effective practices, stands to benefit from increased foreign investment facilitated by the FDI Amendment. By providing strategic control to Indian partners and encouraging private entities to become global players, the government aims to foster a fair regulatory environment and facilitate technology transfers. Moving forward, ensuring investor rights protection and implementing production-linked incentive schemes will further support the growth of Indian space-tech startups and manufacturers.

Looking Ahead

As India progresses in its space endeavors, continued efforts to streamline regulations, resolve disputes, and incentivize domestic manufacturing will be crucial for sustaining growth and competitiveness in the global space market.


The Competition Commission of India (CCI) seeks to promote and sustain competition in the market and prevent anti-competitive practices such as monopolies, cartels, and abuse of dominant market positions. It also reviews mergers, acquisitions, and combinations to ensure they do not have adverse effects on competition in the market.

The Ministry of Corporate Affairs has recently revised the asset and turnover thresholds under the Indian Competition Act through two circulars issued on March 7, 2024. These revisions affect the De Minimis Target Exemption and the thresholds for notification of "combinations" under Section 5 of the Competition Act, 2002. It is when these thresholds are breached that prior approval of the CCI is mandatorily required. Therefore, the amendments to these thresholds have far reaching effects and should be taken note of.

We have summarized the key points from the circulars for the reference of our readers:

Revised thresholds for De Minimis Target Exemption: The previous De Minimis Target Exemption, issued in March 2017, stated that transactions involving a target company with assets less than INR 350 crore (approx. USD 42 million) or turnover less than INR 1,000 crore (approx. USD 121 million) were not subject to CCI approval. This exemption was extended for 5 years in March 2022.

However, the Revision Circulars released on March 7, 2024, have revised these thresholds. Now, the De Minimis Target Exemption will apply if the target company's assets are less than INR 450 crore (approx. USD 54 million) or turnover is less than INR 1,250 crore (approx. USD 151 million).

Revised Section 5 Thresholds: Section 5 of the Act requires transactions exceeding specified asset or turnover thresholds to seek CCI approval. The recent circulars propose a 150% enhancement of these thresholds. For example, the enterprise-level asset threshold has been increased to INR 2,500 crore (approximately USD 1.25 billion) with corresponding adjustments for turnover.

Impact on transactions: These revisions have implications for transactions subject to the Competition Act. While some transactions may benefit from the revised thresholds, they may still require CCI approval if they breach the proposed Deal Value Threshold of INR 2,000 crore (approximately USD 267 million), as per the Competition (Amendment) Act, 2023.

Conclusion: The revisions reflect ongoing efforts by the CCI and the Central Government to update antitrust regulations in India. However, the impact of these revisions must be considered alongside other regulatory changes, such as the proposed Deal Value Threshold, which could affect transaction approval requirements. These updates underscore the importance for parties involved in transactions to carefully assess the thresholds and regulatory landscape to ensure compliance with competition laws in India. On the positive side, these amendments will allow smaller transactions to proceed without prior approval from the Competition Commission of India (CCI). The enhanced thresholds for notification of "combinations" under Section 5 of the Act will also reduce the number of transactions requiring CCI approval. Additionally, the amendments provide clarity and predictability to businesses regarding when regulatory approval is needed for their transactions, potentially encouraging more investment and deal-making activity in India by reducing regulatory hurdles. Moreover, these changes align Indian competition regulations more closely with international standards, which could attract more foreign investment into the country.

The Securities and Exchange Board of India (SEBI) plays a pivotal role in regulating the issuance of shares within the Indian securities market, ensuring transparency, fairness, and investor protection through its guidelines and regulations. SEBI mandates that companies obtain its approval and comply with disclosure requirements before conducting any public issuance of shares, such as IPOs, rights issues, and preferential allotments

On February 6, 2024, SEBI released new guidelines aimed at improving the quality and processing efficiency of draft offer documents submitted for public issues or rights issues of securities.

The guidelines, titled 'Guidelines for returning of draft offer document and its resubmission,' were introduced due to SEBI's observation of deficiencies in some draft offer documents, leading to prolonged processing times. The objective is to ensure completeness, clarity, and consistency in disclosures, thus enhancing investor protection and market integrity.

Key points highlighted in the guidelines include:

  • Draft offer document should employ simple language and clear visual representations.
  • Use of conventional words and active voice is preferred, along with tabular presentation or bullets.
  • Avoidance of multiple negatives and ambiguous statements is essential.
  • Content should be presented in a clear, concise, and intelligible manner.
  • Descriptive headings and subheadings should be used for clarity.
  • Complex presentations, vague explanations, and repetition of disclosures should be avoided.
  • Risk factors must be communicated clearly and unambiguously.
  • Any pending litigation impacting eligibility criteria must be disclosed.
  • Ensure consistency and clarity throughout the document without relying on general rules.
  • Address any regulatory concerns and make necessary revisions based on regulatory interpretations.

Additionally, the guidelines clarify that there are no fees for submitting the draft offer document, but fees may apply for subsequent changes. However, if the document is not submitted, there will be no refund of filing fees.


SEBI's rules for returning and resubmitting draft offer documents aim to make things clear and fair in the primary market. Following these rules helps issuers and lead managers build trust with investors and keep the market lively. Meeting regulatory standards not only protects investors but also helps the securities market grow in India. By adhering to these guidelines, investors can make more informed investment decisions and participate confidently in the primary market. These guidelines will streamline the process of obtaining SEBI's approval for companies, minimizing delays caused by application defects that could have been rectified in advance, thus ensuring expedited processing.

New Rules Open Doors for Direct Listing: Companies Act Amendments

The Ministry of Corporate Affairs (MCA) announced significant changes through a notification dated October 30, 2023, amending Section 23 of the Companies Act, 2013. This amendment, outlined in the Companies (Amendment) Act, 2023, permits public companies to issue a specific class of securities for listing on approved stock exchanges in eligible jurisdictions. However, until recently, there were no established regulations for listing such securities on these exchanges.

On January 24, 2024, MCA and the Ministry of Finance introduced the Companies (Listing of equity shares in permissible jurisdictions) Rules 2024 and amended the Foreign Exchange Management (Non-debt Instruments) Rules, 2019.

Permissible Jurisdictions and Exchanges: The new rules identify the International Financial Services Centre in India (GIFT City) as the eligible jurisdiction, with NSE International Exchange (NSEIX) and India International Exchange (India INX) as the permitted stock exchanges.

Note: IFSC stands for International Financial Services Centre set up under section 18 of the Special Economic Zones Act, 2005 and regulated under the International Financial Services Centres Authority Act, 2019. GIFT IFSC is the maiden IFSC set up in India. One of the main objectives of IFSC is to 'onshore the offshore' i.e. bringing back those India-related financial services and transactions that are currently carried outside of India. Further, the objective of IFSC is to develop a strong global connection and focus on the needs of the Indian economy as well as to serve as an international financial platform for the entire region and the global economy as a whole.

Eligibility Criteria: Under the Scheme, only public Indian companies, listed or unlisted, are allowed to issue and list their shares on an international exchange. As of now, the framework allows unlisted public Indian companies to list their shares on an international exchange. SEBI is in the process of issuing the operational guidelines for listed public Indian companies.

Eligible Public Indian companies:

Para 3 of the Direct Listing Scheme provides that a public Indian company shall be eligible to issue equity shares in permissible jurisdiction, if-

  1. the public Indian company, any of its promoters, promoter group or directors or selling shareholders are not debarred from accessing the capital market by the appropriate regulator;
  2. none of the promoters or directors of the public Indian company is a promoter or director of any other Indian company which is debarred from accessing the capital market by the appropriate regulator;
  3. the public Indian company or any of its promoters or directors is not a wilful defaulter;
  4. the public Indian company is not under inspection or investigation under the provisions of the Companies Act, 2013 (18 of 2013);
  5. none of its promoters or directors is a fugitive economic offender

Additional eligibility conditions may be specified by the permitted international exchanges under their regulations.

Compliance Requirements: Unlisted public companies and listed public companies must adhere to regulations set by SEBI or the International Financial Services Centres Authority. SEBI is in the process of issuing the operational guidelines for listed public Indian companies. They are required to file a prospectus in e-Form LEAP-1 within seven days after the same has been finalised and filed in the permitted international stock exchange. This Form will be required to be filed in the MCA-21 Registry electronically for record purposes.

Direct Listing Scheme: Permissible holders can invest in equity shares of Indian companies listed or to be listed on international exchanges under a specific scheme outlined in Schedule XI. For the purposes of this clause, the permissible holder is not a person resident in India.


MCA's regulatory framework offers unlisted public companies the chance to directly list, pending further SEBI regulations. MCA's rules stress clear eligibility criteria and compliance standards, laying crucial groundwork for companies seeking international market entry. The Scheme enables public Indian companies, especially startups and those in technology sectors, to tap into global capital markets beyond domestic exchanges. This move is anticipated to enhance the valuation of Indian firms to global standards, attract foreign investment, unleash significant growth prospects, and diversify the investor pool. Transactions on IFSC stock exchanges occur in foreign currency, mitigating currency risks for investors. Public Indian companies gain flexibility to access both domestic markets for INR capital and international markets at IFSC for foreign currency capital from global investors. This initiative particularly benefits Indian companies expanding globally, aiming to broaden their presence in foreign markets.

RBI Circular Update: Clarifications on Investments in AIFs

In order to encourage the flow of funds from overseas investors to Alternative Investment Funds (AIF) by this circular RBI has clarified the following information which the foreign investors had raised with regard to the notification issued by RBI on 19th December 2023.

The Reserve Bank of India (RBI) has issued clarifications and relaxations to its December 19, 2023 circular on "Investments in Alternative Investment Funds (AIFs)" on 27th March, 2024. These updates aim to address concerns raised by regulated entities, AIFs, and various companies regarding the initial restrictions.

Key Points:

Investment Restrictions Clarified: The original circular restricted regulated entities from investing in AIFs with investments in companies to which they've lent money within the past year. The recent clarification states that this restriction doesn't apply to investments in the equity shares of these debtor companies. However, other types of investments, such as hybrid instruments, are still subject to the restriction.

Liquidation Requirements Unchanged: The original circular mandated that if an AIF invests in a debtor company of a regulated entity, the entity must sell its investment in the AIF within 30 days. The recent update maintains this requirement, with no changes.

Provisioning Requirement Refocused: Regulated entities unable to sell their investments within the specified time must set aside funds to cover 100% of the investment's value, according to the original circular. The recent clarification refocuses this provision to apply only to the portion of the investment directly linked to the debtor company, not the entire investment.

Deduction from Capital Funds Clarified: The original circular stipulated that investments in certain units of AIFs with a 'priority distribution model' would be deducted from capital funds. The recent update specifies that this deduction applies only if the AIF doesn't have investments in debtor companies of the regulated entities. If it does, regulated entities must comply with the original circular's restrictions, liquidation requirements, and provisioning.

Investments via Intermediaries Exempt: The recent circular clarifies that investments made by regulated entities in AIFs through intermediaries like fund of funds or mutual funds won't be subject to the restrictions mentioned in the circular.

The whole intention of this clarification is to encourage foreign investors and others to invest in India through AIF.


These updates provide clarity and flexibility for regulated entities and AIFs, ensuring smoother transactions and fostering confidence in investment activities involving AIFs.

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.

19 April 2024

Critical Changes In FDI, Competition Law, SEBI's New Guidelines, Direct Listing Provisions, And RBI Clarifications On AIF Investments.

India Government, Public Sector


K Singhania & Co logo
Singhania & Co is a boutique law firm with DNA in both transactional and litigation, having expertise and knowledge of over twenty five years. The Firm is recognized in advising foreign and domestic companies in matters relating to Arbitration, Foreign investments (inward & outward), Trademark, Maritime and Aviation law.
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