New Takeover Code likely to be delayed

The new Takeover Code that proposes sweeping changes in the way mergers and acquisitions are done in India is unlikely to get the final regulatory approval in the next couple of months. It is expected that the new set of regulations will be implemented only around the end of the current financial year.

According to people familiar with the development, the Securities and Exchange Board of India (Sebi) is unlikely to arrive at a decision on the Takeover Code during its next board meet as the Finance Ministry is yet to take a final call on some of the recommendations and wants the market regulator to go slow on it.

“While Sebi has said that it will discuss the Takeover Code in its next board meet, it is highly unlikely that a final decision will be taken,” said a person privy to the development. “There are already talks that the regulator has been told to go slow on the issue and also wait for the new chairman to join in. This will push it to February,” he said.

The capital market regulator, during its board meeting held on October 25, had discussed various issues related to the Takeover Code but decided against taking a final decision. “It was felt that some more time was required to discuss the recommendations of the panel. Our discussions remained inconclusive and we will continue the discussions at the next board level,” chairman C B Bhave had said while addressing the media after the board meet. Incidentally, it is well over four months since the Takeover Panel, formed under the chairmanship of C Achuthan, submitted its 139-page report to the market regulator. The committee, which was formed in September 2009, has recommended an increase in the open offer trigger limit from the current 15 per cent to 25 per cent. Further, the open offer has to be made for all the shares of the target company and not for a minor part of it.

Interestingly, the recommendations invited a lot of feedback from industry participants when the regulator uploaded the same for public comments. Reports suggest that majority of market participants are not comfortable with the clause that open offer needs to be made for 100 per cent of the shares as against the current practice of 20 per cent.

The industry view is that it will escalate the cost of M&A and would deter many genuine buyers from making an acquisition. The regulator, after factoring in the industry feedback, is believed to be in favour of a reduction in the open offer size even while sticking to the panel’s recommendation of increasing the open offer trigger limit to 25 per cent.