The much-awaited decision on revised takeover code recommendations that will change the way mergers and acquisitions (M&A) happen in listed companies may be taken by the Securities and Exchange Board of India late this month or early May.
“We are in consultation. Probably, we will get it (revised takeover code suggestions) through in the next Board meeting,” Sebi executive director Usha Narayanan told reporters on the sidelines of an Assocham event here.
A committee set up by Sebi on the code, headed by C Achuthan, ex-presiding officer of the Securities Appellate Tribunal, had recommended raising the trigger for an open offer to 25 per cent (of total equity bought) from the current 15 per cent. The panel also proposed to raise the statutory open offer size to 100 per cent from the current 20 per cent of all the equity.
The suggestions would make M&A in listed entities costlier, since the acquirer would have to make an open offer for the entire equity. This may put Indian industry, particularly smaller ones, at a disadvantage vis-a-vis cash-rich foreign-based funds, fear many.
Given these apprehensions, the finance ministry wishes to consult with stakeholders. Chief Economic Advisor Kaushik Basu is to have interactions this month. If Sebi takes up the issue at its next board meeting, the finance ministry will not have much time to convene meetings and give its views to Sebi. Sebi was to take up the revised takeover code at the final board meeting presided by former chairman C B Bhave, in February. The issue was deferred because the finance ministry wanted prior discussions on the proposals.
The Achuthan panel had also recommended abolishing non-compete fees to be paid by the acquirer to the promoter of a target company, for not entering the same trade. Such payments could be as high as 25 per cent of the deal value.
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Sebi had sought comments from various stakeholders on the Achuthan report. Narayanan said, “The issues that got maximum feedback are relating to non-compete fee.”
Speaking at the event, the Sebi ED also revealed it was working on an alternative model of corporate governance to enhance transparency and accountability of listed entities. The alternative model is to be designed to suit the needs of Indian companies, she said, adding the existing model was closer to international practice. However, she did not give details.
Narayanan also said Sebi was working on creating a unified platform for enabling companies to file their financial reports. “The reports will then be passed on to various exchanges. Companies would not need to file reports with different exchanges separately,” she said.