Paradigm Shift At India Inc

The hardest hit and probably the ones who will not digest these changes easily are the family-owned companies. Takeover attempts till date were friendly and with the tacit approval of existing owners. Inadequate legal provisions prevented prospective acquirers from making hostile bids.

Now with a proper takeover code in place, the scenario has begun to change. ICI's move to acquire a 9 per cent stake in Asian Paints is a case in point.

Another is Karsanbhai Patel's attempt to buy Gujarat Heavy Chemicals. Despite the promoter, Sanjay Dalmia's refusal to sell out, there seems to be no let-up in Karsanbhai's intentions.

In this case, GIIC, the financial institution, even agreed to sell its stake in GHCL to the highest bidder, unless the GHCL promoter himself purchased its stake.

Another change -- a proactive financial institution looking after its own interests against the earlier practice of playing nanny to promoters.

With substantial amounts already invested in these deals, about Rs 127 crore in the Asian Paints case and Rs 6 crore in the GHCL case, the respective parties must be reasonably sure of their legal standing. Something which was not possible earlier.

As a corollary, for the first time, promoters are busy working at thwarting takeover attempts and even pre-empting them through various means.

Minority shareholders who earlier received token acknowledgement from the owners-cum-management have found a new saviour in FIIs, at least in large companies.

Arvind Mills was probably the latest example of this. In the smaller companies, where FIIs do not tread generally, the mutual funds and FIs could play a more active role. This is another aspect which will trouble promoters as this set cannot be taken for granted any longer.

Last, the trend of professional managers adopting aggressive stances in defiance of the family management will compound their problems, and Indian Hotels is a pointer to this trend.

In sum, Indian promoters will have to re-orient their entire business psyche to survive in this fast changing environment.

From the common shareholders' point of view, these developments may lead to short term uncertainty prompting hasty investment decisions. It would be a wise strategy to wait for a clear picture to emerge before taking action.