India’s
regulatory regime has become increasingly onerous in the last year. At last
week’s IFLR India Outbound Investment Forum, issues with regulators were
discussed at length. Here’s what market players think.
A
strict regulatory regime is undoubtedly difficult to deal with. Nonetheless, both
practitioners and in-house counsel at the IFLR India Outbound Investment Forum
were more concerned with regulatory uncertainty.
Atulya Sharma, Deutsche Bank’s head of legal for the Indian subcontinent
and Mauritius stated his personal view. He believed there were two levels of Indian
regulatory concerns. “One is about restrictions and the other is about
ambiguity in regulations,” he said. “What I react to more strongly is the
latter – the ambiguity in regulations.”
Others
agreed. Priya Mehra, a senior associate at Gibson Dunn, said that when she’s
doing a transaction, regulatory uncertainty was an issue that came up
repeatedly. “In the last six months, in deals we are involved in, we’ve had to
postpone the deals or the signings based on regulatory changes. GAAR (General
Anti-Avoidance Rule) and Vodafone all represent a frustrating and lengthy
process,” she said.
Clarifying
India’s tax regime was of utmost importance to Indian practitioners. The draft
guidelines for GAAR were circulated last week with a proposed
implementation date of 1 April 2013. India is also looking to renegotiate its
tax treaty with Mauritius to close favourable tax loopholes.
Another
issue that has generated uncertainty is the Securities and Exchange Board of
India’s (SEBI) stance on whether put and call options are enforceable. Market
players have expressed frustration over SEBI’s inconsistent position on this
long-standing issue. Practitioners expect an announcement from both the Reserve Bank of India and SEBI regarding the matter
soon.
But, taking a long-term view, Citigroup managing
director and India head of capital markets origination, Sanjay Nayar, was
optimistic. “I think what we’re seeing today is a slowdown that’s driven more
by the ebb and flow of the markets,” he said. “I do think that cross-border
acquisitions will continue to grow. The challenges around these transactions
are less to do with regulations and more to do with commercial considerations.”
For more from IFLR’s India Outbound Investment
Forum:
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natural resources M&A: what lawyers want to see
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Indian corporates can benefit from the euro crisis
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outbound M&A financing: Why corporates should look beyond LBOs
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M&A: how to handle the aftermath of an outbound acquisition