India is a federal constitutional republic governed under a parliamentary system with a pluralistic, multilingual, and a multi-ethnic society. It is the seventh-largest economy by market exchange rates and is the third-largest by purchasing power parity. With an average annual GDP growth rate of 5.8% over the past two decades, India is one of the world's fastest-growing economies. Major industries include textiles, telecommunications, chemicals, pharmaceuticals, biotechnology, food processing, steel, transport equipment, cement, mining, petroleum, machinery and software.
Lex Mundi in India
Lex Mundi provides coverage in India through its member firm, Shardul Amarchand Mangaldas & Co (“SAM & Co”), leading full-service law firm. The firm has 70 partners and 370 lawyers and offices in six major cities in India – New Delhi, Mumbai, Bengaluru, Kolkata, Ahmedabad and Gurgaon. SAM & Co has been at the helm of major headline transactions and litigations in all segments of industry and business besides representing major trans-national corporates on their India entry and business strategy. It is known for its mergers and acquisition, competition law, dispute resolution and arbitration, regulatory litigation, capital markets and private equity practices.
Representative Experience in India:
- Acted as the legal counsel for One97 Communications Limited and the Company’s existing investors, in the Company’s flagship brand, Paytm. Following the deal, Alibaba and Ant Financial will be making a multi-staged investment in the Company vide Alibaba and Alipay Singapore E-Commerce Private Limited.
The transaction parties involved were One97 Communications Limited (Company), SAIF III Mauritius Company Limited (Existing Investor), SAIF Partners India IV Limited (Existing Investor), SAIF Partners India V Limited (Existing Investor), SVB India Capital Partners I, L.P. (Existing Investor), SAPV (Mauritius) (Existing Investor) and Alipay Singapore E-Commerce Private Limited (Investor).
- Advised on the IDFC Bank Demerger. IDFC had received an in principle approval from the Reserve Bank of India to operate as a bank. Pursuant to the conditions set out under the RBI guidelines for licensing of new banks, IDFC had to revise its organisation structure for IDFC Bank and for other businesses under a non-operating financial holding company. Accordingly, IDFC decided to demerge its financial undertaking to IDFC Bank through a scheme of arrangement and separately, transfer the shares of its subsidiaries which undertake other regulated financial services business to its non-operating financial holding company.
Upon effectiveness of the scheme of arrangement, IDFC Bank will commence operations as a RBI licensed bank after having received the financial undertaking from IDFC and shall be listed on the NSE and the BSE.
The net worth of IDFC Bank on the effective date (subsequent to vesting of financial undertaking and capitalization) would be approximately 2.165 billion USD. Net worth of residual IDFC would be approximately 1.646 billion USD.
Innovative Features of the deal:
- SAM & CO. assisted in procuring a detailed opinion on stamp duty laws applicable to a demerger scheme.
- SAM & CO. advised IDFC on protection against hostile takeovers by introducing provisions in its articles of association.SAM & CO. advised IDFC on the process for transfer of the long term infrastructure bonds (under Section 80CCF of the Income Tax Act 1961) issued by it to IDFC Bank. This involved providing advice on issuing notices to bondholders to inform them of the scheme, obtaining the consent of bondholders, obtaining the consent of the government of India and RBI for the transfer of the bonds to IDFC Bank.
- SAM & CO. advised IDFC in relation to converting all indebtedness of the financial undertaking from secured to unsecured pursuant to the scheme of arrangement.
- Advised Vodafone India Limited, which is undergoing a restructuring of its operating telecommunications licensee subsidiaries with a view to consolidating the entire Indian telecommunications business of the group in Vodafone Mobile Services Limited (“VMSL”). The restructuring is being undertaken in two phases as follows:
One of the principal reasons for having two phases is that each scheme has a separate appointed date. The Phase I Scheme has an appointed date of 1 April 2011 and the Phase II Scheme has an appointed date of 1 April 2012. The appointed dates for the two schemes are different as the restructuring intends to avail of the benefit of Section 72A of the Income Tax Act 1961, which requires the business to be in continuing for 3 or more years. Certain licenses obtained by Vodafone Spacetel Limited had not been in operation for more than 3 years as on 1 April 2011 and consequently, the merger of Vodafone Spacetel Limited and its immediate holding company, Vodafone West Limited was undertaken under a separate scheme with a different appointed date.
- Phase I Scheme – comprises of the merger of Vodafone Digilink Limited, Vodafone East Limited, Vodafone South Limited and Vodafone Cellular Limited into VMSL.
- Phase II Scheme – comprises of the merger of Vodafone Spacetel Limited and Vodafone West Limited into VMSL.
In the course of the court proceedings, the regional director, official liquidator and Department of Income Tax had raised various objections to the schemes. These objections were on a range of legal, tax and accounting issues such as the provision for write off of certain loans to related parties, valuation methodology applied for the determining the share swap ratio, rationale for choosing the appointed date, accounting treatment of reserves and status of proceedings in relation to earlier scheme of amalgamations undertaken by the transferor companies.
- In a landmark case, SAM & Co. represented Nestle India Limited before the Bombay High Court in the Writ Petition challenging two separate notices issued by the Food Safety and Standards Authority of India and the State of Maharashtra banning the manufacture, storage and sale of nine variants of “Maggi Noodles” for alleged excess amounts of lead. Maggi noodles had been banned in several Indian states after government laboratories found samples containing more than the permissible quantity of lead, as well as traces of monosodium glutamate, even though the packaging claimed it did not. Given the ubiquity of Maggi noodles in India, the case in the Bombay High Court drew enormous interest. On detailed probe into the case, it was discovered that the testing had been done in laboratories that were not qualified to test for lead. They were not even accredited with the National Accreditation Board for Testing and Calibrating Laboratories. This was surprising; and the SAM & Co team strived to find out what kind of testing had been done. Our arguments won the day with the court which ruled against the six-month ban while ordering fresh tests on Maggi samples.
In one of the largest buy outs in the infrastructure sector, Shardul Amarchand Mangaldas & Co represented Brookfield Asset Management, Inc. in their acquisition of nine project companies (collectively, “SPVs”) of the Gammon group by BIF India Holdings Pte. Ltd (“Purchaser”), a company jointly held by Brookfield Infrastructure Partners LP and Core Infrastructure India Fund Pte. Ltd., from Gammon Infrastructure Projects Limited and its affiliates (“Sellers”). SAM & Co assisted the Purchaser in connection with transaction structure (along with the financial and tax advisors); conducting a due diligence; drafting and negotiating the share purchase agreement and related transaction documents.
This was a deal size of INR 57,000 million (comprising of equity payments and taking over of existing debt). Additionally, this is the first transaction in the roads sector after the Government eased exit rules for developers.
Interestingly, the transaction involved 100% acquisition of nine SPVs by the Purchaser, three of which are power projects and the remaining six are road projects. Four of the road projects have received annuity based concessions from the National Highways Authority of India and two are toll based projects.