R Balakrishnan
SEBI is waking up to complete takeovers

The proposed change should be welcomed by all shareholders, as this kind of a legislation will ensure equitable treatment

Market regulator the Securities and Exchange Board of India (SEBI) seems to be waking up to the idea of complete takeovers. The thought here is that anyone making an open offer should be made to buy out every outstanding shareholder. This writer has been a votary of the idea. This will ensure that we are not faced with ridiculous situations like the Ranbaxy promoter sell-out, where the promoters got a fancy price and the same price was on offer only to the statutory limit of 20% of the shareholders. Most of the minority shareholders were left in the lurch in the bargain. I only hope that this time the talk is serious and that SEBI does not give in to the usual lobby of 'merchant bankers' who will see their business potential reducing and the scope for manipulations coming down.

Once this is made into law, greenmail activities also will come down, since anyone getting in with 15% stake will now have to be prepared to make a bid for acquiring the entire company. This kind of legislation will benefit small shareholders. The proposed change should be welcomed by all shareholders, as this proposed law will ensure equal treatment. Of course, in a takeover, a shareholder always has the option of saying "no, thanks" if he prefers to continue being a shareholder.

Under the current guidelines, the acquirer has to make an 'open offer' to buy out only an additional 20% shareholding. This means that when the 'non-promoter' shareholding is more than 20%, only some of them can exit. Furious calculations are made as to how many shares would get accepted, etc. 

This is patently unfair and unjust. Further, it creates ridiculous situations (like in Great Eastern Shipping) where the acquirer can actually make a hostile bid, without having money to buy out the full company! One does not know whether the intent was actually to acquire the company or just plain old-fashioned greenmail. In any case, one of the two parties made a good pile of money in the whole process. If there was a legal compulsion to buy the entire company, maybe one of the players may have had to stay away. Maybe both would have had to stay away.

According to a PTI report, SEBI has set up a Takeover Regulatory Advisory Committee, with former Securities Appellate Tribunal (SAT) presiding officer C Achuthan as chairman, which is looking into suitable changes in the existing takeover regulations.

While any changes are expected to take effect from the next fiscal only, the committee is said to be seriously looking at increasing the open offer size from 20% to as high as 100%, while it might also increase the open offer trigger limit from 15%, the report had said.
 

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China Express

China is building 42 high-speed passenger rail lines of 13,000 km in the next three years, covering more than 90% of the population. By 2012, trips from Beijing to most provincial capitals would only take between one and eight hours. What’s the scene in India?

High-speed trains are not new, as far as China is concerned, nor are new railway lines across the country and within cities. What is new and of interest is the way it came about. From top speeds of 43 km per hour (kmph) in 1978 it took China 23 years to be able to provide trains capable of 100kmph, and this was for passenger trains, previously often taking four-six days to cross from one end to the other, even longer for trains that traversed across to the erstwhile Union of Soviet Socialist Republics (USSR). As for freight trains, perish the thought, they took forever. As a seafarer visiting Chinese ports in the early '80s, this correspondent was witness to the amazingly ancient rolling stock and decrepit lines serving ports, which even then made India look like an advanced nation.
 
Compared to that, in the early '80s, India already had passenger trains capable of 150kmph and some sections of railway lines capable of providing safe paths for some stretches, at those speeds. "Superfast" meant a train with an average speed exceeding 65kmph, now reduced to trains with average speeds of 55kmph or more, and the Rajdhani Express trains have actually seen an increase in transit times on routes like Delhi-Mumbai and Delhi-Kolkata. On the other hand, the sheer number of passenger trains in India has gone through the roof in the last few decades, and freight trains in India have seen improvement in both rolling stock as well as transit times, with some container trains known as ‘Con-Raj’ rakes achieving even higher average speeds than superfast trains on the same routes.
 
But what is interesting to note is the difference in approach by governance towards improvement of passenger services in China, vis-a-vis India. The Chinese continue to take a position where future development and growth of the interiors is the biggest driver for new passenger train services. In India, the Indian Railways has increasingly given higher priorities to freight movements along already established lines or on newer mining trade routes, with scant attention to developing new routes and areas for better movement of passengers.
 
So the next pragmatic question to be asked is this—should the Indian Railways devote itself to faster passenger and freight trains on fewer routes, or should it try to widen the net to include larger segments of underserved habitats with a mix of freight and passenger movements at the same technology levels and speeds?
 
The answer to this is simple—there is enough room, scope and business to absorb all options, and the sooner the better.
 
The only question here, however, is this—does our form of governance really wish to adopt and execute a strategy of developing and invigorating the interior parts of India, with passenger movements over rail as a motivator for future growth? No amount of number crunching for or against any argument on railways in India will resolve anything unless this specific question is answered. And to help answer that, here are a few examples:
 
a) There is an Indian Railways route known as the "KK" as different from the "KR" or Konkan Rail. Very few people would have heard of the "KK" Railway, some of us may have heard of Koraput or Jagdalpur especially if we researched pre-1947 India a bit more than what the text-books taught us. This route is from Vishakapatnam to Kirandul, off the Bailadila mines, and it is a picture perfect fully electrified line, with plenty of surplus capacity. The KK Line also boasts of the highest broad gauge railway station in India, at Shimilguda, and passes through some of the most beautiful valleys and mountains in India, Araku being one, as multiple trains carrying iron ore race on the same route.
 
There is only one train for passengers on this route, a slow passenger, and it takes over 16 hours to cover 470 kilometres, at an average speed of below 30kmph. Needless to mention, this train is often late, sometimes by days—not just hours. Roads are almost non-existent, and the only airstrips as well as helipads there belong to the mining industry controlled entities, but for the past few decades now, it has been only this one slow-passenger train.
 
b) The Chinese, as we all know, have crossed even permafrost to build a railway line into Tibet. We are still struggling to link Jammu to Srinagar, with Leh/Ladakh nowhere on the horizon.  Moreover, existing narrow gauge lines on routes like Mettupalyam to Ooty and Pathankot to Jogindernagar are increasingly neglected, with freight and passenger movements both being given the go-bye. Likewise, the metre gauge line from Lucknow to the foothills of the Nepal border, barring a few milk-run passenger trains, is slowly withering away.
 
Meanwhile, all attention is diverted by arguing over point-to-point trains and demanding more stoppages on existing routes. Expansion plans, where sanctioned, are often along existing alignments and even spur lines to the interior are not provided—thanks to the gauge rationalisation concept, newer and cheaper metre gauge or narrow gauge lines have been banned—and building broad gauge only costs a lot more.
 
c) Railways are a Central subject. Not too easy for anybody other than those in the Central Government to accrue major side benefits here. Road transport, however, vests with State Governments. And elements in State Governments have tasted the benefits of toll roads, even if it is for decrepit little bridges across minor rivulets as are seen all over Uttar Pradesh, or daily usage options across urban sprawls like the Thane Creek bridge.
 
So what do State Governments do, to increase their revenues, when more cargo moves by rail? They invent newer and more innovative taxes and charges, payable at points of entry and exit into and out of railway stations, thereby forcing cargo back onto the roads. And now they have started doing the same with passenger intermodal connecting transport modes like buses and taxis too. It is almost like a battle out there between the Indian Railways and State Governments.
 
In all this, the real growth of passenger traffic from the interiors of India gets totally voided, while perception is moved towards replicating high-speed trains. So congratulate the Chinese, sure, but don't think of copying them by making one high-speed line on an existing trunk route somewhere.
 
(Big news of the day as far as the railways are concerned is the high-speed train in China. Here are some quotes from one report out of hundreds on the subject, courtesy China Daily, the full report can be seen at http://www.chinadaily.com.cn/bizchina/2009-12/28/content_9235505.htm)
 

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