SEBI may allow higher stake for buyers

While any changes are expected to take effect from the next fiscal only, the SEBI committee is said to be seriously looking at increasing the open offer size from 20% to as high as 100%

Corporate acquisitions in India could become costlier with market regulator, the Securities and Exchange Board of India (SEBI), mulling over making it mandatory for acquirers to make an offer of up to 100% stake in any listed company, reports PTI.

As of now, an open offer for a minimum of 20% in the target company is required to be made by any entity that has purchased 15% equity, either from the promoters or the open market.

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%, sources said.

While an increase in open offer size could mean larger cash outgo for the acquirers, the step is being considered in larger interest of retail and other public shareholders.

As per the current practice, all the public shareholders do not necessarily get an exit option even if the ownership of a company changes hands, as the open offer size need not be more than 20%.

In most of the merger and acquisition (M&A) deals, the promoters sell off their stake to the acquirer, which later makes a 20% open offer for public shareholders.

Accordingly, an acquirer can get away with acquisition of just 35% stake in a listed company— 15% from promoters or open market and further 20% from public open offer—thus leaving as much as 65% equity holders without any option but to sell their shares.

The SEBI committee is currently holding talks with various stakeholders on the issue, sources added.

The acquisition of shares and control of a company are currently governed by the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, commonly known as the Takeover Code.

There have been many amendments to the code, whenever there has been any need, which could pertain to any particular deal.

Experts have been saying that some parts of the code needed to be changed and an urgent attention was needed in the open offer trigger and size-related provisions.

They have been asserting that an open offer trigger of as low as 15% restricts the companies, mostly private equity firms, from making any larger investment in a company. The current rules restrict any investment to below 15%, unless the investor is willing to go for as high as 35% investment.

Globally, many countries such as the UK, Hong Kong and Singapore, have a higher open offer trigger limit.

The demands for a higher open offer size, compared with 20% currently, is mostly based on the fact that many shareholders get stuck in a company even if they want to exit in cases like change in control of a company.

As per the current regulations, an acquirer who intends to acquire shares which along with his existing shareholding would entitle him to exercise 15% or more voting rights, can acquire such additional shares only after making a public offer to acquire at least additional 20% of the voting capital of the target company from the shareholders through an open offer.

The price for the open offer is derived after taking into consideration the negotiated price under the agreement which triggers the open offer and the price paid by the acquirer for acquisition.

Besides, it needs to take into account the average of weekly high and low of the closing prices of the shares of the target company during the 26 weeks, or the average of the daily high and low prices during the two weeks preceding the date of public announcement, whichever is higher.
 

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Top 10 companies add Rs70,000 crore in market capitalisation

A strong market rally triggered by the government's encouraging economic growth forecast helped the country's top 10 companies add over Rs70,000 crore to their market capitalisation in the past week

A strong market rally triggered by the government's encouraging economic growth forecast helped the country's top 10 companies add over Rs70,000 crore to their market capitalisation (m-cap) in the past week, reports PTI.

The country's most-valued firm, Reliance Industries Ltd (RIL), was the biggest gainer with its m-cap soaring by Rs21,314.70 crore, taking its total valuation to Rs3,53,373 crore for the week ended 26th December. Shares of RIL gained 6.40% to close at Rs1,075.20 at the end of Thursday's trade on the Bombay Stock Exchange (BSE).

On Wednesday, finance minister Pranab Mukherjee expressed hope that the economy would grow by 7.5%-8% during the current financial year.

The stock market traded only for four days, Friday being a holiday for Christmas.

RIL is followed by oil major ONGC which saw its valuation surging by Rs2,609 crore to Rs2,56,172.50 crore.

Power utility major NTPC inched up to third place by adding Rs18,840.80 crore to its valuation, while another State-run trading company MMTC Ltd slipped to fourth place from third even after adding Rs3,702.80 crore to its m-cap. The total m-cap of NTPC stood at Rs1,89,563.10 crore and MMTC at Rs1,74,566.80 crore.

The country's largest iron ore producer NMDC's valuation surged by Rs7,314.20 crore taking its total m-cap to Rs1,64,198.10 crore.

IT companies Infosys Technologies and TCS together added Rs7,807.61 crore to their market valuation. At the end of the week, the m-cap of Infosys Technologies that retained its last week ranking at the sixth position, swelled to Rs1,48,507.10 crore while TCS ranked at seventh position with Rs1,46,535.60 crore.

The country's largest State-run lender State Bank of India (SBI) which is at eighth position, added Rs4,644.10 crore to its m-cap, taking its total valuation to Rs1,40,822.70 crore.

Private telecom service provider Bharti Airtel was at ninth position rising by Rs1,446.58 crore and power equipment maker BHEL—at the 10th spot—added Rs2,420.67 crore to its m-cap. Bharti Airtel's total valuation stood at Rs1,21,844.50 crore and BHEL's m-cap stood at Rs1,15,972.20 crore.

Meanwhile, the 30-share index Sensex surged nearly 4% or 640.78 points to close at 17,360.61 points on the BSE during the past week.

RIL, the numero uno in the list, is followed by ONGC (Rs2,56,172.50 crore), NTPC (Rs1,89,563.10 crore), MMTC (Rs1,74,566.80 crore), NMDC (Rs1,64,198.10 crore), Infosys (Rs1,48,507.10 crore), TCS (Rs1,46,535.60 crore), SBI (Rs1,40,822.70 crore), Airtel (Rs1,21,844.50 crore), and BHEL (Rs1,15,972.20 crore).
 

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Deden Sulaiman

7 years ago

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RCom, Idea pulled up by ASCI for misleading ads

The Consumer Complaints Council of ASCI found that 15 advertisers, including RCom and Idea Cellular, Dabur and Elder Pharma and coaching centre Career Launcher, violating the council's code

The Advertising Standards Council of India (ASCI) has pulled up 15 companies, including telecom companies, for running misleading ad campaigns during July to October this year, reports PTI.

During the said period, the Consumer Complaints Council (CCC) of ASCI found 15 advertisers, including Reliance Communications (RCom) and Idea Cellular, Dabur and Elder Pharma and coaching centre Career Launcher, violating the council's code.

RCom had to suspend a television commercial as it failed to substantiate its claim 'with comparative data of other mobile services' that the company is the 'fastest mobile broadband service in India'.

When contacted, the company said it is currently making modifications in the TVC. "RCom has already responded to ASCI and is making necessary modifications to the TVC," a spokesperson from RCom said.

Another mobile operator, Idea Cellular, also had to modify its commercial, which showed people walking while talking on mobile phones, as ASCI upheld complaints from consumers that it encouraged the 'unsafe act of walking while talking on the mobile phone'.

"Some action sequences as depicted in the TVC, show dangerous practices and manifest a disregard for safety without justifiable reason," ASCI said. Queries sent to the company remained answered.

Fast moving consumer goods (FMCG) company Dabur had to modify two of its TV commercials, which according to the CCC were misleading. The two ads were that of Dabur Vatika shampoo, which claimed that the product 'eliminates dandruff from (the) first wash' and that of Dabur Lal Tail which said that massaging with the oil 'leads to doubly faster growth in babies'. The CCC found that the claims were misleading.

Coaching centre Career Launcher's (CL) campaign claiming 'four out of five IIM call-getters in CAT 2008 from Delhi and NCR' were its students was suspended as it was unsubstantiated.

The ASCI also found Elder Pharma's campaign of showing a woman unbuttoning a shirt in an advertisement of deodorant 'Fuel' to be vulgar and it was asked to be modified.
 

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