The buyback of 113 million equity shares by Infosys for US$2 billion required clearances of markets regulators in the US, UK and France in addition to India said a partner at AZB & Partners that advised the country’s second-largest IT company.
“Given that Infosys is listed on New York Stock Exchange and Euronext London and Paris, apart from having to comply with the buyback regulations of Securities and Exchange Board of India (SEBI), compliances under laws of various countries had to be ensured,” said AZB partner Sugandha Asthana.
“A big challenge was to harmonize the entire process even though there were conflicting requirements under laws of various jurisdictions. Application for ‘no-action” had to be made to the [US] Securities and Exchange Commission [SEC] to seek certain exemptions. The uncertainties around the legal regime on ADRs [American depositary receipt] also had to be dealt with, in consultation with regulators.”
The buyback was approved by the company board in mid-August 2017 and completed in end of December. Post-extinguishment, Infosys had 2.18 billion equity shares with the promoter group in possession of 12.9% of the shares. This was Infosys’ first buyback scheme since its founding in 1981.
The buyback process involved issuing of public announcements and a follow-up with a letter of offer to shareholders upon approval by SEBI. “The buyback showed good participation by shareholders and after finalizing the actual entitlements based on the tender in the buyback, Infosys accepted the shares in the buyback. This was followed up with post buyback announcement and filings,” said Asthana.
The tender offer was made in accordance with the Companies Act, 2013, and the SEBI (Buyback of Securities) Regulations, 1998. “The existence of ADRs required compliances with the Depository Receipts Scheme. In addition to these, the provisions of the Exchange Act of the United States and rules and regulations of Euronext London and Paris also needed to be complied with.”
AZB was involved in drafting of all buyback related documentations and advising on regulatory compliances. The firm was also closely involved as Indian counsel to Infosys in seeking a no-action letter from the SEC in relation to the buyback. In addition to Asthana, the team consisted of senior partner Sai Krishna Bharathan, partner Harsh Maggon and senior associate Palaq Vora.