Sebi panel does a somersault on preferential offers

According to investors, corporates are already enjoying a host of benefits like higher creeping acquisition limit of 10 per cent every year, buybacks without taking the consent of shareholders etc. “The takeover panel has given a major bonanza to corporates in the name of corporate democracy. Now one can expect a host of takeovers using preferential allotments. But investors will not get a chance to exit as such takeovers will be out of the purview of the takeover code,” said BSE dealer Pawan Dharnidharka.

“The so-called corporate democracy seems to be restricted to corporates. Sebi should not succumb to the lobbying of corporates. It’s also debatable whether this takeover panel is needed or not. If the Sebi puts well-defined regulations, what’s the need for a panel” asks Dharnidharka.

The government and the regulator had earlier relaxed the buyback norms under pressure from corporates. The provision that the company—which is planning a buyback—should get the permission from the shareholders was dropped and diluted the buyback process by stipulating that only a board approval is needed.

The takeover panel has allowed a small concession for shareholders: it has said a change in control through the preferential allotment should be ratified by the shareholders in the extra-ordinary general meeting. It has also said postal ballots can be used to ensure wider participation of shareholders.