India Inc churns; 59pc of open offers were for change in control

Mumbai, January 20: | Updated: Jan 21 2002, 05:30am hrs
India Inc is in the midst of a major churning and consolidation. The process of takeovers and consolidation of holdings has gained ground sharply over the past years, indicating a rising level of activity in industry. According to the latest data compiled by Sebi, as much as 59.24 per cent of all 318 open offers by offer value since 1997-98 were for change in control of management. Besides, the takeover fear of the industry by foreign entities has been proved to be largely a myth, with only 60 out of 318 being cases where the acquirer is a foreign entity.

The Sebi data tracks various aspects of takeover behaviour from the period 1997-98 till December 31, 2001. During this period, the total offer value stood at Rs 5,631.13 crore.

The data clearly shows that acquisitions have been the most preferred route of growth and consolidation. While about 59 per cent of the offers were for change in control, consolidation of holdings accounted for another 32.40 per cent and substantial acquisition was the objective in case of 8.36 per cent of the offers in terms of value. In all, there were 318 open offers since 1997-98, of which 199 were for change in control of management, 69 for consolidation of holdings and 50 for substantial acquisition. Says Sebi chairman DR Mehta, “There is certainly a major process of consolidation and restructuring going on in Corporate India. The takeover data definitely suggests that. It’s a major change.”

In fact, Sebi has almost finalised a major set of changes to its takeover code, and the review panel headed by Justice PN Bhagwati will give its final approval on January 25.

The industry-wise breakup of open offers also tells an interesting story. In terms of number of open offers, the financial sector leads the pack, accounting for 22.01 per cent of all open offers. This is followed by the information technology sector with 8.81 per cent, food processing with 7.86 per cent and textile with 7.55 per cent. In terms of offer value, however, the picture is vastly different when it comes to industry-wise breakups. Here, electronics/electricals sector accounts for 22.12 per cent, followed by chemicals at 16.87 per cent, metals at 13.30 per cent.

Data shows that the fears by Indian companies that foreigners were on prowl have been largely misplaced. Only 18.87 per cent of all open offers since 1997-98 were from foreign companies, while a whopping 81.13 per cent were from Indian entities. Non-promoters accounted for a hefty 78.93 per cent of open offers, while promoters accounted for only 21.07 per cent. New shareholders mounting open offers accounted for 60.06 per cent, while existing shareholders were 39.94 per cent.