SEBI announces new takeover norms; open offer trigger raised

The new norms mark an increase in the open offer size for public shareholders from 20% currently, while the trigger for such offer has also been raised from 15% in the existing regulations

Mumbai: Heralding a new set of rules for takeover of companies, the Securities and Exchange Board of India (SEBI) on Thursday said an entity buying 25% stake in a listed firm will have to mandatorily make an offer to buy additional 26% from public shareholders, reports PTI.

The new norms mark an increase in the open offer size for public shareholders from 20% currently, while the trigger for such offer has also been raised from 15% in the existing regulations.

Partly accepting the recommendations of a SEBI-appointed panel on the matter, the market regulator also decided to abolish the non-compete fees that acquirers generally pay to the sellers in merger and acquisition deals.

The decisions were taken at a SEBI board meeting here on Thursday and were later announced by chairman UK Sinha.

The SEBI panel on new takeover regulations had recommended an open offer for buying up to 100% in the target company, while suggesting an increase in the trigger limit to 25%.

While the recommendation on trigger has been accepted, the same for offer size has been kept lower due to intense opposition from industry and other market participants.

At the time of recommendation of Achutan committee, it was said that all the public shareholders were required to be given an exit opportunity in case of promoters of the target company selling out their stake to acquirers.

For removal of non-compete fees, which could be as high as 25% of deal value, the logic was given that promoters should not get higher price than that for public shareholders.

Commenting on the SEBI decision, consultancy firm Corporate Professionals MD Pavan Kumar Vijay said: "The SEBI board approved new takeover regulations. It is a good move in the direction of simplification of the complicated law."

He said the move to raise open offer trigger point from 15% to 25% was a "good move for increasing fund raising options and joint ventures".

It has been said that institutional investors were not being able to put money in listed companies in excess of 15% in fear of mandatory requirement of additional 20% open offer. Now, the investors can buy up to 25% stake without making an open offer.

Mr Vijay said SEBI has decided to increase open offer size to only 26% due to "industry pressure against the 100% offer size recommendation of Achutan Committee".

"Though logic of 26% is not known, but the move is good for domestic promoters and industry as cost concerns and funding of offer is addressed to a major extent," he added.

On non-compete fee, he said that SEBI has accepted the TRAC recommendation of scrapping the non-compete fee.

"Outright scrapping may not be treated as a right move as promoters can not be treated as right in all cases. Where the promoters have real personal contribution in business, Non-compete fee is logical," he added.


MakeMyTrip fined by Consumer Disputes Redressal Forum for providing deficient service

Forum penalises the company for a total of Rs6,000 for providing insufficient accommodation despite early bookings

The Consumer Disputes Redressal Forum, Bengaluru, has fined travel website for causing inconvenience and humiliation to one of its customers. The Forum also asked the travel site to pay Rs5,000 as 'compensation' and Rs1,000 towards 'cost' to the customer.

Arjun Ramaprasad and his wife, both Bengaluru residents, complained to the Forum about humiliation and inconvenience caused to them due to inappropriate arrangements made by

Soon after their marriage, the couple planned a pleasure trip to (Port Blair) Andaman & Nicobar Islands from 7th to 14th November last year. They made advance bookings through MakeMyTrip's Bengaluru branch by paying Rs21,000 on 4 August 2010 and the balance of Rs36,400 on 27 September 2010.

Mr Ramaprasad's case is that the entire trip organised by the company caused "humiliation and inconvenience" as the couple had to wait four hours at the airport; accommodation was made after waiting for five hours at the hotel reception. Further, Mr Ramaprasad alleged that the accommodation had no attached bathroom, the itinerary was shuffled; the food was not properly arranged... he has a long litany of woes.

Mr Ramaprasad served a legal notice on the company dated 22 December 2010, and asked a sum of Rs2 lakh as compensation and cost. Though the company neither replied nor paid any compensation to the company, hence he approached the forum.

In the consumer forum, MakeMyTrip, refuted the allegations and argued that arguments by the complainant are false and frivolous. They submitted that except the couple all other passengers were "happy and satisfied" with the trip.  

The Forum observed that the company denied some allegations, while admitted some, stating that it is difficult to handle a large group of 160 members.

The Forum said in its order that waiting time at the airport was beyond the control of the company as it was due to bad weather. The Forum also considered other "shortfalls" such as the Bharatang Trip, was under the 'optional tour' category and was organised by a local vendor. "The allegation of the complainant (Mr Ramaprasad) is baseless. And there is no deficiency in the service on the part of Op (the operator, MakeMyTrip) to compensate for that," the Forum said, while passing the order.

Mr Ramaprasad also alleged that the company did not obtain tickets for the journey from Port Blair to Havelock Island, which was to be made by MV Makruzz, a luxury cruise. Instead they were made to sit on the seats meant for the crew of MV Makruzz vessel. denied these allegations stating that such changes were accepted by customers as a part of the terms & conditions. The Forum observed that such a shortfall was beyond the control of the company.

The Forum accepted the main allegation—the complaint of waiting for long hours at the reception and not providing a room with an attached bathroom. "When the programme (was) organised by Op in a large group, that too booked well in advance, it is their responsibility to arrange all necessary arrangements prior to landing the group at the destination. Because everybody needs to rest and freshen up immediately after the journey. There is no justification from the Op for waiting for a long time at the reception counter to allot the rooms to the passengers, (even though) it may be a large group," the consumer forum sated.

The Forum added, "When (the operator) is not able to organize the trip and not able to handle the crowd, nobody compelled them to do it."

While passing the final order, the Judge said, "Therefore, in our view, the Op caused deficiency in service in not providing proper facilities and the trip was not properly organised which caused inconvenience, humiliation to the complainants though the other travellers opined that the trip was good and organised in a proper manner."

 The forum fined Make My Trip to pay Rs5,000 as compensation and Rs1,000 as cost to Mr Ramaprasad within 30 days of the order, failing which the company will have to pay interest of 10% pa from the date of the order, which was passed on 12 July 2011.



V M Balakrishnan

5 years ago

.I have cancelled my flight ticket (Indigo 6E-111) on 28.5.11. Till today my refund was not paid by Make My Trip.

Vikas Gupta

5 years ago

Very good to see that somebody has the courage to fight against Big Co.s to protect Consumers' Rights. Khudos to Mr. Arjun & his wife

Slowdown passing phase: Montek

"I don't think that our economy is sinking. There is a temporary slowdown," Montek Singh Ahluwalia, deputy chairman of the Planning Commission said. However, he added that if the world economy is facing some difficulty, then India would get affected

New Delhi: The economy will grow by 8.2% in 2011-12, slower than the previous fiscal but it is not 'sinking' despite global headwinds, reports PTI quoting Planning Commission deputy chairman Montek Singh Ahluwalia.

He said though the economy is facing headwinds, "I don't think that our economy is sinking. There is a temporary slowdown."

However, he said if the world economy is facing some difficulty, then India would get affected.

"We will grow at 8.2% this fiscal. It will be worse than 2010-11 but 8.2% is very high growth rate...I think, yes there is slight slowdown, I don't think it is permanent slowdown. In the next year 2012-13 why should we not go back to over 8.5% plus economic growth," he said.

As for inflation, Mr Ahluwalia admitted that it is a sticky affair. "I think at the end of the year, inflation will be lower. This time inflation was more difficult to control," he said yesterday.

Under impact of high interest rates, factory output fell to 5.6% in May this year from 8.5% in the same month last year, as the manufacturing and mining sectors fared poorly.

While finance minister Pranab Mukherjee had pegged economic growth for the current fiscal at around 9% in his budget speech, the government and the Reserve Bank of India (RBI) both subsequently lowered their projections.

The central bank has hiked key policy rates 11 times since March 2010 to curb demand and tame inflation. In its recent quarterly review on Tuesday, RBI hiked its short term borrowing and lending rates by half a percentage point.


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