INDIA Law and Practice Contributed by: Raj Ramachandran, Varun Sriram, Krutamana Pisipati, Aadhitya Logeshen and Abheejit V, JSA
3.3 Impact of the Choice of Listing on Future M&A Transactions Certain minority squeeze-out provisions have been detailed in 6.8 Squeeze-Out Mechanisms . Accord- ingly, an Indian company listing on a foreign exchange, as per 3.2 Choice of Listing , may still avail of the squeeze-out mechanisms available to companies under the Indian Companies Act of 2013, subject to and in accordance with any specific mechanisms of the relevant exchange on which it is listed. 4. Sale as a Liquidity Event (Sale of a Privately Held Venture Capital- Financed Company) 4.1 Liquidity Event: Sale Process In a proposed liquidity event of a company, the share- holders may choose to sell via an auction, a bid pro- cess or a bilateral negotiation. While bilateral negotia- tions are more common, auctions are also used for transactions of higher value. Auctions are sometimes considered more efficient for the seller as they are implemented in parallel with vari- ous prospective purchasers to achieve the intent of sale within a definitive time period and ensure faster negotiations and definitive closure. Bilateral negotia- tions are focused on sales and acquisitions and may therefore take longer. There can be further delays if bilateral negotiations do not conclude, and the com- pany or seller would have to restart the process. The revised regulatory scrutiny for the acquisition of companies with digital platforms has extended trans- action timelines. The parties to such transactions now seek to include digital personal data privacy (“DPDP”) related compliance warranties and data-related rep- resentations into the definitive documents, given the notifications of the Digital Personal Data Protection Act, 2023 and the release of the rules thereto in 2025 for public comments, as further detailed in 7.1 Regu- lations Applicable to a Technology Company and 9.2 Data Privacy . 4.2 Liquidity Event: Transaction Structure The structure of a transaction in case of a liquidity event would vary depending on numerous factors.
IPOs are considered one of the key exit options as they provide liquidity to all stakeholders. Strategic or secondary sales as an exit option are also explored, and the nature of the exit depends on the entity’s busi- ness, market interest, and growth prospects. Investment documentation would typically include all exit options (ie, IPO, secondary or strategic sale), and the stakeholders take a final decision based on vari- ous factors, including these ones. 3.2 Choice of Listing On 24 January 2024, the Ministry of Corporate Affairs released the Companies (listing of equity shares in permissible jurisdictions) Rules, 2024. These rules permit certain unlisted and listed public companies to list in permissible foreign jurisdictions at the Gujarat International Finance Tec-City – International Financial Services Centre (“GIFT-IFSC”) in India, where they sat- isfy the prescribed conditions. Currently, the only permitted exchanges are the India International Exchange and the NSE Interna- tional Exchange in the GIFT-IFSC. Trading on these exchanges can only be undertaken by “permissible holders”, which are defined as “not a person resident in India”. Certain companies have been seen primarily listing on the Indian stock exchanges’ main boards, while others take the route for small- and medium-sized enterprise (SME) IPOs. Recently, the government expanded the definition of “SMEs” by prescribing different thresh- olds for small and medium enterprises to facilitate more companies coming within the purview of an SME, which has fewer compliance requirements than listing on the main board. SMEs proposing an initial public offer should ensure that their post-issue paid- up capital is not in excess of INR100 million (approxi- mately USD1.18 million), or their post-issue face value capital, if in excess of INR100 million (approximately USD1.18 million), should not be in excess of INR250 million (approximately USD2.9 million). While several options are available, the decision to list on a home country exchange or a foreign exchange is dependent on factors discussed in 3.1 IPO v Sale .
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