Capital market regulator Securities and Exchange Board of India (Sebi) will soon take up the recommendations of the Takeover Regulations Advisory Committee (TRAC) for discussion. “The comments have come to us; we are collating them and it is our intention to take it up at the next Sebi board meeting,” Sebi chairman CB Bhave said on Friday. The outcome of the board meeting will decide Sebi’s course of action.
Headed by C Achuthan, TRAC had submitted its draft final report to Sebi on July 19. Until August 31, the regulator received over 100 comments from the public on the recommendations.
The Achuthan committee had recommended an increase in the open offer size to 100% of equity share capital from the present minimum limit of 20%. The committee also suggested raising the open offer trigger to 25% from the current 15%. This would mandate any entity acquiring 25% or more in a target company to make an open offer to buy all shares of the target company, the idea being to ensure equal opportunity for all shareholders willing to tender shares.
The committee had recommended that an acquirer willing to consolidate its holding through creeping acquisitions can purchase 5% equity stake annually up to a maximum of 75% of share capital from the current 55%.
Currently, where the acquirer’s holding is above 55% but less than 75%, a one-time allowance to increase shareholding by 5% through market purchases, without having to make an open offer, is permitted.
This was allowed since October 2008, provided that the post-acquisition holding of the acquirer did not cross 75%. Further, the committee recommended voluntary offers of a minimum size of at least 10% for consolidation by persons already holding over 25% without breaching the minimum public shareholding limit.
On the sidelines of the first annual merchant banking summit organised by the Association of Merchant Bankers in India, Bhave also urged merchant bankers to price issues reasonably. Pointing towards a couple of public offers with low retail participation despite a buoyant secondary market in the recent past, the regulator said issuers are not willing to leave enough on the table for retail investors. “In a bid to maximise returns for the promoters, merchant bankers are not looking at the interest of retail investors,” said Bhave.
The regulator also took a dig at the recent practice of merchant bankers quoting near zero fees to win the deal. “Is it a healthy practice and how long can it be sustained,” Bhave wondered, while advising merchant bankers to evolve some kind of self-regulation. This could be done by evolving a common code of conduct and ethics.
Addressing the summit, Sebi executive director Usha Narayanan suggested that merchant bankers post details about the public offers they had handled and their market performance compared to its issue price on their websites. “Some thoughts need to come into it,” she said.
Source:Financial Express