Promoters Begin To Shore Up Defences

The first signs of activity in the post-Bhagwati committee corporate India are being witnessed with a number of brokers beginning to get orders to consolidate holdings from promoter groups under the new takeover regime.

The significant part is that promoters already holding 51 per cent or more in their companies are also consolidating their stakes further, even as leading merchant bankers are making rounds of large corporate houses with shortlists of corporates which are possible targets. A Calcutta broker said players have begun chalking out strategy with their promoter-clients on shoring up holdings directly and indirectly.

The promoters are also being told to increase their holdings even if they already own 51 per cent, since that would give them adequate leverage in diversifying.

This is so because if the company wishes to go public at a later stage, the promoters' holdings would get further diluted, and could fall below 51 per cent.

Another broker said: "Prom-oters are keen to increase holdings even if they have 51 per cent, since that way they do not have to conform to the creeping acquisition norm, and also have adequate safety from takeover threats." While promoters under the new takeover regime can increase their holdings from the market without making an open offer, that advantage is not there if the holding falls below 51 per cent. The promoters are therefore seeking to do so to have access to the market at a later date without fear of their holdings falling below 51 per cent as a result of the capital issue.

For houses where promoters hold less than 51 per cent, brokers are being asked to pick up stakes themselves, which the promoter would buy in such a manner and timeframe as to conform to the norm on creeping acquisitions.