The Securities and Exchange Board of India is likely to announce the draft takeover norms on Monday with several far-reaching recommendations that will change the face of Corporate India.
According to sources,the panel is believed to have recommended higher open offer size and trigger for attracting takeover code. The panel,appointed by the Sebi,is in favour of the acquirer making an offer for up to 100 per cent stake in any listed company,thus making the cost of takeover higher.
As of now,an open offer for a minimum of 20 per cent in the target company is required to be made by any entity that has purchased 15 per cent equity,either from the promoters or from the open market. Another proposal is to alter the trigger for an open offer to 25 per cent of the total equity,up from the current 15 per cent. This will make it in line with the Companies Act,where an entity gets a seat on the board only at 26 per cent.
The Sebi set up a Takeover Regulations Advisory Committee,with former Securities Appellate Tribunal presiding officer C Achuthan as chairman.
If the 100 per cent open offer takes place,it must be a curtain-raiser for hostile takeovers in India. This is because,under the current guidelines,the voluntary open offer cannot take the acquirers holding beyond 75 per cent,making it difficult for anyone to complete the 100 per cent buyout.
But if this revision of increasing the open offer size to 100 per cent takes place,several hedge funds,private equity funds and limited partnerships are likely to be eagerly waiting to grab 100 per cent ownership of some of the Indian companies,which is not possible under the existing guidelines.
The UKs takeover panel recently suggested that the 50 per cent plus one minimum acceptance condition threshold required to be achieved for an offer to succeed is set at too low a level and should be raised to,for example,60% or two-thirds of the voting rights in the offeree company.
SEBI appointed a 12-member TRAC in September 2009. The other members of TRAC are Kumar Desai,an advocate,Somasekhar Sundaresan, Kaushik Chatterjee,Group CFO,Tata Steel; Y.M. Deosthalee,CFO,Larsen & Toubro; N. Venkateshwaran,IIM,Ahmedabad: A.K. Narayanan,President Tamil Nadu Investors Association,Sourav Malik,ED,Kotak Mahindra Capital Co Ltd; Raj Balakrishnan,MD,DSP Merrill Lynch and Usha Naryanan,ED,Corporation Finance Department (CFD),SEBI. Neelam Bhardwaj,GM,CFD,is the Member Secretary.