Markets regulator Securities & Exchange Board of India (Sebi) has simplified the creeping acquisition norms for company promoters that hold more than 55% stake. It has clarified that an acquirer can procure additional shares or voting rights up to a maximum of 5% in one or more tranches in another company within any time frame, instead of being restricted to just a single financial year.
The Sebi order, which was issued on Friday, therefore, settles an ambiguity in its earlier order of last October 30 that had left the time period unstated. The earlier guidelines, issued under Sebi?s (Substantial Acquisition of Shares & Takeovers) Regulation, restricting the time period to a single year had constrained companies that were facing liquidity problems in completing their purchases within a year.
Promoters planning to raise their stakes in companies were also unclear as to whether their 5% purchase of scrips was a one-time exemption or could be applicable for each financial year. Under Sebi rules, the purchase of shares in a company up to 5% does not need prior regulatory approval. The decision was taken at Sebi?s latest board meeting held in New Delhi on July 10.
Safron Capital Advisors executive director Jinesh Mehta said, ?Though the circular is a little restrictive, on a collective basis it has brought more clarity to the earlier amendments. In adverse situations, this will help promoters stabilise the price of shares.? Safron is an investment-banking outfit that specialises in public offers as well as mergers & acquisitions.
The order is, however, an interim one and could be revised after Sebi receives more data. ?In the interim, considering the many queries that are being received by Sebi and in order to bring greater certainty and to avoid multiple interpretations, it is felt necessary to clarify the position with respect to the aforesaid amendments,? the Sebi order states.
However, consolidation via bulk, block or negotiated deals or through preferential allotment would not be permitted.