Sebi may allow higher stake for buyers

As of now, an open offer for a minimum of 20 per cent in the target company is required to be made by any entity that has purchased 15 per cent equity, either from the promoters or the open market.

Sebi has set up a Takeover regulatory advisory committee, with former Securities appellate tribunal (SAT) presiding officer C Achuthan as Chairman, which is looking into suitable changes in the existing takeover regulations.

Open offer

While any changes are expected to take effect from the next fiscal only, the committee is said to be seriously looking at increasing the open offer size from 20 per cent to as high as 100 per cent, while it might also increase the open offer trigger limit from 15 per cent, sources said.

While an increase in open offer size could mean larger cash outgo for the acquirers, the step is being considered in larger interest of retail and other public shareholders. As per the current practice, all the public shareholders do not necessarily get an exit option even if the ownership of a company changes hands, as the open offer size need not be more than 20 per cent. 

In most of the M&A deals, the promoters sell off their stake to the acquirer, which later makes a 20 per cent open offer for public shareholders.

Accordingly, an acquirer can get away with acquisition of just 35 per cent stake in a listed company — 15 per cent from promoters or open market and further 20 per cent from public open offer — thus leaving as much as 65 per cent equity holders without any option to sell their shares.

The committee is currently holding talks with various stakeholders on the issue. The acquisition of shares and control of a company are currently governed by the Sebi.