Raiders 038; saviours

QUESTIONS to Lakshmi Mittal about his interest in Indian acquisitions have sharpened the focus on business ownership structures. That the promoters8217; share is being upped by the Tatas in Tisco is just one indication of how India8217;s leading industrialists are looking at the future. When unfriendly corporate takeovers become more frequent, as they will, all concerned should treat them as just another strategy, not some strange, predatory practice that doesn8217;t jell with Indian 8216;ethos8217;. Actually, our corporate structure is more prepared now than ever before to handle hostile acquisitions.

First, there8217;s Sebi8217;s takeover code. Not yet vigorously tested on the ground, although it is a few years old, the code reads reassuringly rational. Existing shareholders who want to mount takeover bids must announce their intent at a 5 per cent shareholding level. For first-time buyers into a company, the trigger is 10 per cent. The code deals with white knights 8212; companies/persons who may help the targeted company against the hostile bidder 8212; off-market manoeuvres and other major concerns. The second modernising feature of Indian business is that the influence of government run financial institutions FIs is less. There was a time when it was right to ask just how private Indian private companies were, given the large shareholdings of sarkari FIs and given that these shareholders were often government yes-men. However, with the privatisation of some major FIs, the link between North Block and boardrooms has weakened. Related to this is a forced change in political attitudes. It will be more difficult for politicians to play games during takeover battles 8212; reforms have at least partially changed the dynamics.

Indeed, given official India8217;s stand during Mittal8217;s bid for Arcelor it would take an enormous amount of hypocrisy for Indian politicians to play favourites during hostile takeover attempts. The thing to remember is that any arguments centred on 8216;national icons8217; is illogical when it comes to shareholder capitalism. If capitalists need saving, only capitalists should save them. Warren Buffet had acted as a white knight when corporate raiders targeted the Washington Post. His stake in the Post is now worth several times his buying price. Arcelor8217;s shareholders, on the other hand, made a packet out of Mittal8217;s bid. In capitalism, being a 8216;saviour8217; or a 8216;raider8217; can be equally rewarding.