SEBI Liberalises Takeover Norms

Raises trigger point for open offer to 25%; new rules expected to revive mergers and acquisitions

The Securities & Exchange Board of India (SEBI) today said an entity buying 25 per cent stake in a listed firm will have to mandatorily make an offer to buy additional 26 per cent from public shareholders. This is seen as an attempt to lure investment after mergers and acquisitions fell 37 per cent.

The new norms mark an increase in the open offer size for public shareholders from 20 per cent currently, while the trigger for such offer has also been raised from 15 per cent in the existing regulations.

In Japan, the trigger for an open offer is 33.3 per cent, while in Hong Kong it is 30 per cent and in Singapore it is 29.99 per cent. In all three, the trigger requires an acquirer to make an offer for the entire company.

The panel, which included Tata Steel Ltd. (TATA) Chief Financial Officer Koushik Chatterjee and YM Deosthalee, CFO Larsen & Toubro Ltd. (L&T), also said that shareholders who already own more than 25 percent can make a voluntary open offer of a minimum size of 10 percent, half the earlier minimum size of 20 percent.

The decisions were taken at a SEBI board meeting and were later announced by Chairman UK Sinha.

The panel on new takeover regulations had recommended an open offer for buying up to 100 per cent in the target company, while suggesting an increase in the trigger limit to 25 per cent.

While the recommendation on trigger has been accepted, the same for the offer size has been kept lower due to intense opposition from industry and market participants.

For removal of non-compete fees, which could be as high as 25 per cent of deal value, the logic was given that promoters should not get higher price than that for public shareholders.

Commenting on the SEBI decision, consultancy firm Corporate Professionals Managing Director Pavan Kumar Vijay said: “The SEBI Board approved new Takeover Regulations. It’s a good move in the direction of simplification of the complicated law.”

He said the move to raise open offer trigger point from 15 per cent to 25 per cent was a “good move for increasing fund raising options and joint ventures”.

It has been said that institutional investors were not able to put money in listed companies in excess of 15 per cent in fear of mandatory requirement of additional 20 per cent open offer.

Now, the investors can buy up to 25 per cent stake without making an open offer.— Agencies

Rs 100 fee on Mutual Fund investments

New investors will now have to cough up an additional Rs 150 for investment of Rs 10,000 and above in mutual funds, while the charge will be Rs 100 for existing investors, SEBI has said. Investors are already paying a commission in some cases, besides up to 2.5 per cent of their investment towards expanses of fund management.

SEBI said to help mutual funds penetrate into retail segment in smaller towns, the distributor would be allowed to charge Rs 100 as transaction charge per subscription. No charge can be made for investments below Rs 10,000. An additional amount of Rs 50 can be charged to first time MF investor, it said

Now shorter and simpler IPO form

A new short and simple form for IPO investors for increasing retail participation in the stock markets will be introduced. “The whole form has been changed and this will lead to reduction in the size of the form by about one-fourth,” SEBI chairman U K Sinha said here.

To implement on report in IPO scam

In an unprecedented move of reviving charges dismissed as “null and void” in the past, SEBI today decided to implement a two-member committee’s report charging depository NSDL and others of irregularities in the IPO scam of 2003-2006. The regulator would ask NSDL to comply with the findings of the report.