The brass of the Securities and Exchange Board of India (Sebi) has its plate full. At the next meeting of its board, scheduled later this month, the capital markets’ regulator is expected to finally give a go-ahead to the proposed Takeover Code, pending for a long while.
Also on the agenda are new norms for mutual fund distribution and the sensitive matter of the National Securities Depository Ltd, involving Sebi’s former head. The Bimal Jalan report (on the ownership and functioning of market infrastructure institutions) is, however, unlikely to make it to the agenda.
According to sources, the board meet, scheduled for June 27, has been postponed to June 30. The new Takeover Code is the most important matter, as the finance ministry is through with its deliberations, that saw some of the biggest names from India Inc giving suggestions. Sebi is expected to lower the level of mandatory open offer from the proposed 100 per cent.
“It is almost one year since the report was submitted to Sebi but building a consensus proved to be a difficult task,” said a person privy to the matter. “Most industry representatives wanted the open offer size to be reduced from 100 per cent, as they felt it would give foreign acquirers an advantage over their domestic counterparts.”
The Achuthan committee had proposed that the open offer trigger limit be increased from the current 15 per cent to 25 per cent and the acquirer make an open offer for all the remaining shares, i.e. 100 per cent. While industry players go along with the increase in trigger, they want the size of open offer to be reduced to at least 75 per cent.
“It is going to be a significant agenda, as the first board meet of the new chairman (U K Sinha) went unnoticed,” said another person, wishing not to be named. “The roadmap for the current financial year was the only notable matter decided in the March meet. The market is still waiting for some strong signals from the new regime.”
OTHER ISSUES
Apart from the Takeover Code, the levy of transaction costs in mutual funds is expected to generate a lot of debate. Sinha was one of the most vocal critics when former Sebi chairman C B Bhave banned entry loads in August 2009. Sinha, who earlier headed UTI Mutual Fund, formed a seven-member panel in May to examine the MF sector’s grievances on abolition of entry loads. The panel is believed to feel a levy of Rs 100-150 per transaction, along with some other changes, could again make distribution of MF products lucrative.
NSDL is another matter high on the agenda. The regulator has time till August to present its final decision on the matter to the Supreme Court. The board, following a petition filed in the apex court, had met in April on the matter but did not take a final decision. Sebi has to decide if it is ready to restore the Mohan Gopal committee order, which it decided to keep aside in 2009.
The board might also take up a few issues related to the primary market, such as simplification of application forms for Initial Public Offers (IPOs) and a common format for Asba — Application Supported by Blocked Amount — and non-ASBA forms, a long-standing demand.
The Jalan committee report, however, has failed again to make it to the agenda. It is believed the regulator needs more time to deliberate on the recommendations of the committee, formed in January 2010 to review the ownership and governance of institutions like stock exchanges, depositories and clearing corporations.
