Sebi may make mandatory for firms to buy untendered shares in open offers

Yagnesh Kansara & Sujoy Manna

Mumbai, Jan 3: In a major move that will have far reaching consequences in protecting the interest of the small investors of companies intending to delist their shares through open offer, the Securities and Exchange Board of India (Sebi) is likely to make it mandatory for companies to buy any outstanding shares at the last open offer price from the investors even after the open offer is closed and shares are delisted from the bourses.

Recently, a number of Indian entities of foreign companies have annoucned open offers for small investors. In certain cases, there were instances where investors, for some reason, were not able to tender their shares in the open offer. It is these shares which Sebi is expected to ask the companies to buy at the last open offer price.
A suggestion in this regard was recently made by Kirit Somaiya, president, Investor Grievances Forum (IGF) to the capital market regulator.

A top Sebi official confirmed the move, saying, “We have received this kind of suggestion from the forum headed by Mr Somaiya and are looking into it. The final decision in this regard has not been taken, however, we will take the decision on this issue with the investors interest supreme in our mind.”

While making a presentation before Sebi chairman DR Mehta recently, IGF brought to their notice that even after the offer period is over, there have been instances where some small shareholders have failed to tender their shares for a variety of reasons. This provision, if made mandatory and accepted by Sebi, will go in a long way in protecting the interest of investors who otherwise will be deprived of the benefit of higher price and lucrative exit option which the open offer gives to them.

The regulator is looking into a suggestion of making it mandatory for the companies to keep the offer open for the remaining shareholders who have failed to tender their shares, irrespective of the reason, in the offer made by the company.