Bar for creeping acquisition up

Open offer if promoters' stake crosses 55%.

The Securities and Exchange Board of India (Sebi) has decided to curtail the availability of the creeping acquisition route to promoters who hold more than 55 per cent in a company.

Such promoters will have to make the mandatory open offer if they wish to raise their holdings over 55 per cent. Earlier, the cut-off was 75 per cent.

The creeping acquisition route permits promoters to buy an additional 2 per cent stake each year from the open market, without triggering Sebi's takeover code. 
 

Promoter's privilege Companies with promoter holding of over 55%
Company	Promoter stake
Gillette India	88.76
TCS	84.84
Syngenta India	84.02
Wipro	83.28
Sterlite Ind	82.34
iGate Global Solutions	82.06
Dabur	78.16
Nirma	77.36
Tata Infotech	74.87
Wockhardt	74.86
Torrent Pharma	74.07
Ingersoll-Rand	74.00
VSNL	72.72
Cadila Healthcare	72.02
Sun Pharma	71.94
Pidilite Ind	71.80
Castrol	71.03
HCL Technologies	70.88
Hughes Software Sys	70.23
Procter & Gamble	68.81
Hinduja TMT	68.72
Godrej Consumer Prod	68.15
Alstom Power	66.48
Alfa Laval	64.10
Micro Inks	63.56
D-Link India	63.41
Andhra Bank	62.50
HCL Infosystem	62.44
Thermax	61.98
Nestle India	61.85
Abbott (I)	61.70
Jindal Steel & Power	61.17
Ramco Systems	61.15
Motor Ind	60.55
Kotak Mahindra Bank	60.41
Aventis Pharma	60.38
Adani Export	59.72
JB Chem & Pharma	59.09
Indo Gulf Fertilisers (DM)	58.19
Indo Rama Synth	58.09
Cummins India	58.02
TVS Motor	57.49
Wyeth Ltd	57.15
Jindal Iron	55.62
Asahi India Glass	55.61
Saw Pipes	55.05

The amended regulations do not allow promoters to hike their stake beyond the 55 per cent mark even through the preferential allotment route.

The new mark had been set, Sebi officials explained, keeping in mind that each company must have a minimum 25 per cent non-promoter holding. A mandatory 20 per cent open offer, post the 55 per cent mark, will take the promoter's stake to 75 per cent.

Though a notification has not yet been issued to this effect, one would be issued this week, said a Sebi official.

Sebi's decision follows recommendations made in December. Currently, delisting is mandatory only if the non-promoter holding falls below 10 per cent.

The new regulations also pave the way for a minimum 25 per cent non-promoter holdings at all

Foreign lenders may sell Dabhol debt for $360 mnBar for creeping acquisition up times. This means if the promoters' shareholding in the company goes above 75 per cent, they will have to compulsorily delist through the reverse book-building route.

If the promoters choose not to delist, they will have to bring their stake below 75 per cent.

Merchant bankers said the amended regulations would make acquisitions extremely unattractive in the corporate sector, especially for multinationals.

According to an investment bank source, "MNCs are comfortable with a 76 per cent holding, which they could have reached through the creeping acquisition route."

It will also prove to be troublesome for existing promoters who have a stake of more than 55 per cent because they may have to make an open offer if they wish to retain their holding at this level.

But the regulations make a concession in that such promoters may make an open offer for a lower percentage of shares as it will take their stake to 75 per cent.

In case the promoters do not want to increase their stake, they will have to bring their stake below 55 per cent through a sale offer.