Sebi lets 5% more stake buy by acquirer in firms

Accordingly, Sebi, on Thursday, issued an interpretative circular under regulation 5 of the SAST (Substantial Acquisition of Shares and Takeovers) Regulations 1997, which were amended by it on October 30, 2008, wherein an acquirer – together with persons acting in concert with him – allowed to pick up 5 per cent stake or voting rights of target company without making it public subject to certain conditions. 

The conditions stipulated by Sebi is that the acquisition is made through open market purchases in normal segment on the stock exchange but not through bulk deal or block deal or negotiated deal or preferential allotment.  Besides, the increase in the shareholding or voting rights of the acquirer is pursuant to a buy back of shares by the target company.
Also, such acquisition of 5 per cent should be calculated by aggregating all purchases, without netting the sales.

At the same time, the post acquisition shareholding of the acquirer should not exceed beyond 75 per cent.  This limit is applicable irrespective of the level of minimum public shareholding required to be maintained by the target company in terms of clause 40A of the Listing Agreement. Further, the regulator pointed out that the latest circular was issued following several requests having received from market participants and listed companies seeking an interpretation of the proviso inserted by Sebi in the amendment.