New takeover norms likely from next fiscal

Market regulator the Securities and Exchange Board of India (Sebi) is likely to usher in new norms for mergers and acquisitions (M&As) with effect from next fiscal, as the proposals have generated divergent reactions from stakeholders.

The regulator is in the process of collating comments received on its public discussion paper on the new Takeover Code which, among other things, proposes to bring in minority shareholders at par with promoters in terms of price received in M&A deals.

"The proposed code may be made effective from April 1, 2011. Public comments have been received and they are mostly positive," a source in the know of the development said.

The source said, however, "While there has been a positive response from public on the trigger point at 25 per cent, the proposal of open offer for entire 100 per cent stake has received mixed response."

The recommendations made by the Takeover Regulatory Advisory Committee include raising the public offer trigger to 25 per cent, from the existing 15 per cent.

Besides, the panel has suggested that the acquirer make an open offer for the entire 100 per cent stake in case its holding crosses the 25 per cent threshold.

Analysts have maintained that funding needs of acquiring companies may soar if buyers have to bid for the entire 100 per cent stake.

Yesterday, C Achutan, the Chairman of the Sebi Takeover Regulatory Advisory Committee had said that proposals of the panel are expected to be approved by Sebi by December.

After it approves the new norms with changes, if any, the Sebi might consider applying them on all the deals from the next fiscal onwards.

The source said the new code would be effective for M&As happening in the next financial year, and will not be implemented with retrospective effect.

It means that the mega billion-dollar Cairn-Vedanta deal would not come under the purview of the revised regulations.

As for minority shareholders, they will benefit in terms of parity in pricing under the new rules. The new code proposes providing opportunity for complete exit to them and get the same price as a substantial shareholder.

Achutan had earlier said that the code would provide a level playing field to all stakeholders, whether they are promoters or small investors.

The suggestions, if implemented, will replace the archaic takeover rule that was amended 23 times in the past 13 years.

Achutan, who was appointed the head of the panel in September 2009, submitted the report to Sebi Chairman C B Bhave on July 19.

The suggestions of the committee would be implemented after Sebi takes into account over 600 public comments received by it till August end.