Sebi goes slow on open offer approvals

A few of the proposals are awaiting clearance for over six months now.

Requests for approvals for takeover and buyback offers are piling up with the market regulator, the Securities & Exchange Board of India (Sebi). Around 60 companies are awaiting such approvals from the regulator. A number of these approvals, which normally take 2-3 weeks to materialise, are hanging fire for over six months now.

While, about 30 companies are awaiting approval for their proposed open offer for takeovers (worth Rs 4,000 crore), another 30 are awaiting clearance for their buyback offers. While at least 9 issues are under Sebi observation, another 10 are currently under process. Some of the issues where Sebi had received documents during September to December last year, such as offers by Shriram City Union Finance and KIC Metalinks, are still being processed.
 

TOP FIVE OPEN OFFERS
Name of the target co	Date of receipt of offer document	Offer size (in Rs cr)	Status
Pfizer	29-Apr-09	650	Observation
Novartis India	April 2, 2009

437 Observation Shriram City Union Finance26-Sep-08431Under process Bombay Rayon Fashions9-Apr-09322.27Observation Orissa Sponge Iron & Steel13-Mar-09201.30Under process Source: Sebi

Sources close to the development said that if all parameters of disclosure norms of an offer were adequately met, an approval is passed within 21 days. As per the regulation, if disclosures in the draft letter of offer are inadequate or the board receives a complaint regarding the public offer, the board may call for a revised letter of offer or offer its comments within seven working days of filing such revised letter. Concerned Sebi officials could not be reached for comments.

“While some of the documents have been kept under examination regarding valuations, others have been kept under observation. In some cases, Sebi is also awaiting clarifications from the merchant bankers of these offers,” said an official close to the development.

Some of the largest proposed open offers include the Rs 431-crore offer of Shriram City Union Finance, the Rs 201-crore offer of Orissa Sponge Iron & Steel, a Rs 437-crore offer of Novartis India, a Rs 322-crore offer of Bombay Rayon Fashions and a Rs 650-crore offer of Pfizer. Sources said that some of these large offers involving overseas companies were also delayed due to the absence of an approval from the Foreign Investment Promotion Board (FIPB).

Furthermore, about another 30 companies are awaiting approvals for their proposed buybacks. Though an e-mail to the concerned Sebi executives remained unanswered, sources close to the development said that a buyback offer, which were done in open market through stock exchanges, normally took just about a week to receive clearance.

Recently, Sebi Chairman C B Bhave told during a conference that the regulator may need to review the buyback norms in order to prevent abrupt rallies in stock prices on mere talk of a buyback by some companies, which eventually either scrap such plans or buy back just a small portion of the proposed shares on offer.