INDIA Law and Practice Contributed by: Utsav Johri, Sucheta Bhattacharya and Nishal Makharia, JSA Advocates & Solicitors
if provided pursuant to the terms of the NCDs, can be exercised only after completion of one year from the issuance of these NCDs. Buyback of NCDs is typically structured as a redemption at the option of either the investor or the issuer. Prepayment of ECBs is generally subject to compli - ance with the MAMP. Any prepayment prior to the expiry of the MAMP requires prior approval from the RBI. However, the MAMP requirement does not apply in certain circumstances, including: • conversion of ECB into equity; • repayment of ECB out of the proceeds of equity investment by a non-resident on a repatriation basis, where such proceeds are received after the drawdown of the ECB; • refinancing of ECB; • waiver of debt by the lender; and • repayment of ECB undertaken in connection with corporate actions such as closure, merger, demerger, arrangement, acquisition of control, amalgamation, resolution or liquidation involving the borrower or lender. 3.6 Recent Legal and Commercial Developments In addition to the Model DTD described in 1.8 Impend- ing Regulation and Reform , SEBI has also stipulated that a listed entity whose debt securities are listed on a stock exchange shall list all non-convertible debt securities proposed to be issued on or after 1 January 2024 on the stock exchange(s). It has also brought in parity in respect of disclosures to be made in the case of privately placed NCDs and NCDs issued by way of a public issuance. In addition, the RBI has notified the Foreign Exchange Management (Guarantees) Regulations, 2026, which liberalise the earlier regime by replacing prescriptive approval-based rules with a principle-based regime, permitting resident entities to give or obtain cross-bor - der guarantees so long as the underlying transaction is FEMA-compliant and borrowing/lending eligibility norms are met. For private credit financings, this wid - ens structuring flexibility; for example, foreign guar - antees for rupee bonds will now be permitted from a variety of offshore lenders as opposed to being avail -
able only from a handful of eligible non-resident enti - ties, and the underlying debt instruments in respect of such guarantees need not have a minimum average maturity of three years. Draft regulations have been proposed to permit banks to extend financing to real estate investment trusts and infrastructure investment trusts. The proposal is intended to deepen the debt market for infrastructure and real estate investment vehicles while providing additional avenues of funding. 3.7 Junior and Hybrid Capital The Indian debt market is focused predominantly on senior or pari passu debt instruments. Typically, sen - ior debt is funded by the lenders, and subordinated debt and equity infusion is provided by the sponsor/ promoter. However, junior and hybrid investments are made by private credit funds where required. Private credit funds also deploy funds in convertible instruments, quasi-equity instruments and warrants alongside debt instruments issued by the borrowers. Junior/hybrid finance are generally raised in the form of compulsorily convertible preference shares (CCPS), optionally or partially convertible preference shares, CCDs or OCDs. If such finance is provided by an off - shore entity, optionally or partially convertible prefer - ence shares or debentures are treated as ECBs and must comply with the ECB guidelines. If the junior/hybrid capital is structured as CCPS, optionally or partially convertible preference shares, CCDs or OCDs or partially convertible debentures, then the key documents are the securities subscrip - tion agreement and the investor rights/shareholder agreement. Deals involving funding to holding companies (Hold - Co) are typically secured without recourse to the assets of the operating companies (OpCo). The secu - rity package may comprise shares of the HoldCo and the OpCo, security on the assets of the HoldCo and (in non-sponsor deals) a guarantee from the promoter.
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