Sebi amends takeover norms, offers anchor investor facility to IDR issues

Written by fe Bureau | Mumbai | Updated: Sep 24 2009, 04:17am hrs
Capital market regulator Securities and Exchange Board of India (Sebi) on Tuesday amended the takeover regulations and offered the facility of anchor investors to Indian Depositry Receipts issues. This will raise the attractiveness of the issues meant to attract foreign companies to invest in Indian equities market. An anchor investor gives smaller investors confidence that the shares will be actively traded in the market.

The board of the regulator also decided that at least 30% of issue size of such issues will be reserved for allocation to retail individual investors, who may otherwise be crowded out.

On takeover regulations, Sebi has clarified that the creeping acquisition route of 5% would be available subject to the condition that post-acquisition, the shareholding / voting rights of the acquirer (together with persons acting in concert with him), shall not increase beyond 55%. The measures are meant to streamline the takeover process. Under Sebi rules, takeover process begins once someone gets at least a 15% stake in the target company.

It also clarified in respect of ADR/GDR holders, stating that those who are entitled to exercise voting rights, have to make an open offer upon crossing the threshold limit of 15%. But the revised norms will not be applicable with retrospective effect, said CB Bhave, Sebi chairman, at a press conference in Mumbai on Tuesday.

The regulators decision is in sharp contrast to its earlier informal guidance given to Bharti, indicating MTN will have to make an open offer only upon conversion of depository receipts into equity shares. Since MTN will acquire 36% in Bharti via depository receipts, the deal was exempt from open offer regulations. Sebis amended takeover norms are likely to impact the Bharti-MTN deal if it is not closed before the amended regulations come into effect.

At present, depositories cast votes on behalf of ADR/GRD holders, which is mostly in line with the companys decision. Of late, there has been instances where depositories have been casting their votes at the instance of the ADR/GDR holders, said Bhave.

A Sebi release said, In tune with the market developments, the board has decided to amend the Takeover Regulations, where the ADR/GDR holders are entitled to exercise voting rights on the shares underlying GDR/ADR by virtue of clauses in the depository agreement or otherwise open offer obligations shall be triggered upon crossing the threshold limit.

The Sebi board, which met here on Tuesday, has also decided to extend the facility of anchor investors to the issue of Indian depository receipts (IDRs) on similar terms applicable to the public issues made by domestic companies. The board also decided to reserve 30% of the IDR issue size for retail individual investors.

In order to protect the interest of shareholders, Sebi has made it mandatory for all listed companies, which go for corporate restructuring, to disclose their accounting statement to the stock exchanges in line with the applicable accounting standards.

The regulator has also increased the threshold limit of total holding for disclosures on acquisition or divestment of up to 2% from current 15%-55% to 15%-75%.