Sebi revises takeover norms

 Securities & Exchange Board of India (Sebi), on Tuesday, revised the takeover norms by bringing ADRs/GDRs with voting rights on par with domestic shares, which makes an open offer mandatory if 15 per cent stake is bought in a company through these securities.
Sebi’s move is likely to have major ramification on the fate of proposed Bharti-MTN deal as both are hammering out the contentious issues including the open offer. At present, an open offer is triggered by holding of ADRs/GDRs (American and Global Depositary Receipts) only if they are converted into domestic shares with voting rights. The purchase of 15 per cent domestic shares also makes it mandatory for the buyer to make an open public offer to buy an additional 20 per cent equity in the company.

With Tuesday’s revision of regulations, buying 15 per cent ADRs/GDRs would also trigger an open offer, provided these securities have voting rights attached with them, Chairman C B Bhave told reporters after the board meeting.

For ADRs/GDRs without voting rights, an open offer would be triggered only after their conversion into domestic equity shares with voting rights.

Stating that the revision is in tune with market developments, Bhave said the amendment will be applicable from the day it takes place it would not be effective retrospectively. The amendment will bring ADR/GDR holders with voting rights at par with shareholders.

A takeover regulation panel has been appointed for an overall review of regulation, he said.
Bhave noted that takeover norms would now cover IDRs and GDRs with voting rights. IDRs can also have anchor investors. The board has also decided to extend concept of ‘anchor investors’ to issue of Indian Depository Receipts (IDRs) on similar terms as applicable to public issues made by domestic companies. The board said at least 30 per cent of issue size of IDRs will need to be reserved for allocation to retail individual investors.