Assocham For Easing Of 20% Open Offer Limit

The capital market expert committee of the Associated Chambers of Commerce and Industry of India (Assocham) has stated that the recommendation of the Reconvened Committee on Takeover Code to make it compulsory to acquire a minimum of 20 per cent shares whenever the Takeover Code is triggered will make it impossible for persons holding 80 per cent or more to acquire shares even for genuine purposes.

The chamber suggested that the committee, which has been set up under the chairmanship of justice P N Bhagwati, should allow the acquisition of the remaining shares whenever the acquirer has a holding of 80 per cent or more.

 

Further the status quo regarding the purchase percentage should be maintained, it said. The Assocham capital market expert committee chairman K S Mehta felt that the information with respect to the composition of the promoters' group should be made public through some medium that is easily accessible.

Also the information about the changes in their holding should be available on the website of the stock exchanges.

The members welcomed the move for removal of the need for a 5 per cent holding of shares for inter-se transfer among the different group of promoters.

It was felt that the ceiling of the 25 per cent premium for change of large chunk of shares was not justifiable. The generally acceptable premium is 50 per cent or above the market price for any large transfer of block even between the promoter group.

The committee felt that the ceiling on premium for automatic exemption for inter-se transfer of shares shall be fixed at 50 per cent instead of 25 per cent as recommended.

The recommendation relating to a minimum offer price determination was welcomed by the committee and it was opined that to avoid manipulative practices the two-weeks period shall be reckoned from a date which is 30 days from the date of public announcement.

Assocham welcomed the proposed changes relating to competitive bidding and further recommended that the competitive bidder or acquirer shall not be allowed to sell off his holding at least for a period of 6 months after the closure of the bidding processor.

This would help in curbing manipulative and other fraudulent practices in the market. The chamber welcomed the move of making it compulsory for acquirers to give disclosures whenever they cross the 10 per cent and 14 per cent limits in addition to the 5 per cent limit.

It was felt that for making acquisition under the creeping limits there should be a requirement of pre-disclosure of information to the stock exchanges and in turn to the market.

This will help the market adjust the prices beneficial to investors. Disclosure post-acquisition under the creeping limits do not serve the market well.

Assocham felt that there was a need to make provisions for price determination in case of acquisition in India pursuant to global or overseas mergers or acquisitions.

Investors in India shall get the valuation on the same basis as used for the global mergers or acquisition of the parent company, it added.