The Hindu Business Line : SEBI goes easy on takeover norms — Promoters allowed to have higher stake

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SEBI goes easy on takeover norms — Promoters allowed to have higher stake

Our Bureau

Mumbai , Dec. 31

THE Securities and Exchange Board of India (SEBI) amendment to the takeover regulations has given more flexibility to promoters for hiking their stakes from 55 per cent to 75 per cent and beyond, in a move to help companies that go for corporate restructuring.

Earlier, promoters were not allowed to breach the 75 per cent limit as 25 per cent minimum public shareholding was mandatory. For instance, a promoter who currently holds 60 per cent will not be able to make an open public offer as it would violate the minimum 25 per cent public shareholding requirement.

Under the latest amendment, the promoters' stake can go up to 80 or 85 per cent after the open offer, provided they reduce their stake to 75 per cent to ensure that the public holds a minimum of 25 per cent.

The amendment also removed restriction on market purchases and preferential allotments.

SEBI said it has also been provided that outgoing shareholder (promoter) can sell entire stake to incoming acquirer in case of a takeover. As per this, if the outgoing shareholder has 60 per cent stake, the incoming stakeholder has to make a public offer for another 20 per cent stake. According to the existing guidelines, this would have been impossible as after the open offer the public shareholding will go down below the 25 per cent. The amendment allows the incoming acquirer to make a public offer for 20 per cent. However, the incoming acquirer is required to reduce the equity stake later to ensure that the public shareholding remains at 25 per cent, a SEBI official clarified.

This will give greater flexibility in cases relating to corporate restructuring, he said.

"... to ensure the maintenance of minimum public shareholding (25 per cent) for continuous listing it has been decided that if in the process of corporate restructuring under Takeover Regulations, the target company's public shareholding falls below the prescribed minimum, the restoration of minimum public shareholding will take place through framework provided in the revised Clause-40A of listing agreement," a SEBI release, after its board meeting on Friday, said.

Officials said the promoters can reduce their stakes through new issue of shares to public, disinvestments through offer for sale or sale of holdings through the stock exchange.

The meeting also decided to take the advice of external consultants to re-engineer itself. "Given the challenges, SEBI needs to re-engineer itself," the SEBI Chairman, Mr M. Damodaran, said.

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