| | AUGUST 20238Changes to India's withholding tax regime will raise borrowing costs for Indian companies seeking funds from foreign investors by 30 to 40 basis points, according to J.P. Morgan analysts.According to Corporate Research analyst Aman Aggarwal, the change may have a negative impact on the supply of funds because issuers may seek liquidity in the onshore market at competitive rates."The majority of the companies that will be affected are Indian renewable names." According to Aggarwal, "the majority of Indian renewable bond structures involve an offshore Special Purpose Vehicle (SPV) that issues USD bonds and on-lends the proceeds to onshore subsidiaries."He also stated that costs for Mauritius-based SPVs would rise by 10 to 20 basis points. Indian companies can currently raise funds from foreign investors through External Commercial Borrowing (ECB) and Foreign Portfolio Investments (FPI). The tax change impacts the latter.Since 2013, foreign portfolio investors have benefited from a lower five percent tax on bond interest, making investments in the country more appealing. This exemption expired on July 1, forcing them to pay a 20 percent tax on interest income.Despite the change, foreign portfolio investors (FPIs) purchased Indian shares worth 466.18 billion rupees ($5.63 billion) on a net basis in July, according to data from the National Securities Depository Ltd (NSDL). On August 10, the National Company Law Tribunal approved Zed Entertainment Enterprises Ltd's proposed merger with Sony India. On July 10, the NCLT reserved its decision on the merger of Zed Entertainment Enterprises and Culver Max Entertainment (previously known as Sony Pictures Networks India). This is a critical regulatory approval for the mega merger, which was announced in 2021 but has been delayed due to a variety of factors.The merger was stymied initially by a courtroom feud between Zee's founders and its largest shareholder, and then by an insolvency case filed against Zed, which was halted in February.In December 2021, Zee Entertainment and Sony Pictures reached an agreement to combine their businesses. Subsequently, both media companies approached the tribunal to seek approval for the merger, having already obtained necessary permissions from the National Stock Exchange (NSE), Bombay Stock Exchange (BSE), and other regulatory bodies like the Competition Commission of India (CCI) and the Securities and Exchange Board of India (SEBI)."Zed, which faced legal challenges in finalising the merger, can now breathe a sigh of relief as the deal moves forward." The merger with Sony is expected to benefit a variety of stakeholders, including the companies themselves by strengthening their competitive positions, shareholders by potentially increasing value, and viewers by potentially providing a broader range of content. "The combination of their strengths may result in synergies that can foster growth and efficiency in their operations," said Sonam Chandwani, Managing Partner of KS Legal & Associates.After hearing arguments from creditors who objected to the scheme, including Axis Finance, JC Flower Asset Reconstruction Co, IDBI Bank, Imax Corp, and IDBI Trusteeship, the Mumbai bench of NCLT, comprised of H V Subba Rao and Madhu Sinha, reserved the order last month. CHANGE IN TAX REGIME RAISES BORROWING COSTS BY 30-40 BPS, SAYS J.P. MORGAN EXPERTSNCLT GREEN LIGHTS SONY INDIA & ZEE ENTERTAINMENT'S ACQUISITIONIN FOCUSIN FOCUS
< Page 7 | Page 9 >