Industrialists Seek Buy-Back Defence
Leading industrialists have called for putting a system in place wherein buy-back of shares can be used as a defence mechanism by Indian corporates to prevent any hostile bids from corporate predators. In a seminar organised by the Federation of Indian Chambers of Commerce and Industry (Ficci), titans of the Indian industry spoke on various aspects of the new takeover code along with Sebi chairman D R Mehta and leading bankers and chiefs of financial institutions. According to R P Goenka: "The code is a transparent document. There is a need for providing a tool for control to the Indian entrepreneurs. This can happen only if buy-back of shares is allowed. This will also boost the capital market as entrepreneurs would buy their shares from the market."
He felt that many industrial houses controlled their companies with holdings below 51 per cent. "If buy-backs are allowed managements can consolidate their holding by buying back shares from the market," he added. Endorsing the view, S K Birla said: "Besides providing for buy-back, there is also a need to have other options like non-voting shares and golden share to the corporates for providing a level playing field. Any takeover where the sourcing of funds is external, it should have prior clearance of the authorities concerned."
Sebi chairman D R Mehta made it clear that the regulator had already given its proposal to the government on the buy-back of shares. He said: "The Sebi board has been informed about the necessity of the buy-back mechanism and the matter has been taken up with the government."
Ajay Piramal, chairman of Piramal Enterprise, also wanted buy-back of shares for corporates. He added: "Creeping acquisition of 2 per cent is nothing. It should be actually raised to five per cent and beyond 51 per cent there should be no restriction on promoters for consolidation."
K K Modi pointed out that selling of shares by financial institutions to promoters should be kept outside the purview of creeping acquisitions.