Sebi mulls open offer relaxation for Satyam buy

Written by Markets Bureau | Mumbai | Updated: Feb 3 2009, 07:09am hrs
Markets regulator Sebi on Monday said it was considering a waiver of regulations that guide how shares should be priced in an acquisition in the case of Satyam Computer Services. Chairman CB Bhave told reporters after a Sebi board meeting that he had received a letter from the newly constituted Satyam board to exempt it from certain provisions of the Sebi (Substantial Acquisition of Shares & Takeovers) Regulations, 1997.

Bhave said the January 7 acknowledgement of a Rs 7,800-crore accounting fraud by erstwhile Satyam chairman B Ramalinga Raju had created an unusual situation in the pricing of the scrip. Hence, there was a genuine need to look into this matter, said Bhave. We will not take this on a case-to-case basis, but will look at it generally and will make changes in the amendments so that such abnormal cases are handled through a transparent mechanism, he said.

The mechanism of arriving at the price will be looked into later, Bhave added. Sources in Sebi said they expect this would be concluded by the end of the week. The measures will be effective from the date of amendment to the regulations/DIP guidelines/listing agreement, a Sebi statement added.

Sebis decision will benefit L&T, which has already acquired a 12% stake in Satyam, and is keen to make an open offer once Sebi clears the pricing mechanism. According to the old mechanism, the average price of the past six months is considered a benchmark for an acquiring company to make an open offer. In Satyams case, the average price for the past six months (26 weeks) works out to Rs 262.19, but the current price is Rs 57.60. The average from January 7 is only Rs 36.

The Sebi chairman acknowledged that shareholders who had bought the scrip before it tanked on January 7 could suffer a loss if the waiver was granted, saying: The Sebi guidelines are looking at a transparent pricing mechanism and not one that considers a profit or a loss. He refused to speak on the matter of insider trading investigations, saying as the matter was sub-judice, the regulator would follow the law of the land.

Bhaves announcement came as Sebi moved the Supreme Court to gain access to Raju for questioning. Sebi said had been forced to approach the apex court as it had been consistently refused such access by Andhra Pradesh courts.

In another development, Institute of Chartered Accountants of India president Ved Jain said Price Waterhouse had asked for more time to frame a response on its Satyam audit practice. We will give extra time if required, but we need an answer in another 30 days, Jain said.