These two major changes, if incorporated in the takeover code, will make life difficult for the promoters of many large companies having less than 50 per cent stake. According to a quick study done by SMC Capitals in the listing of BSE 500 companies, in as many as 215 companies promoters own less than half the equity capital making them prime targets for takeover.
As the Achuthan committee has suggested for an open offer size to be revised from the current 20 per cent level to 100 per cent, an acquire can now get more than 50 per cent share in a company and throw out the existing promoter from management. If the acquirer’s stake reaches up to 90 per cent, he can even get the company delisted from the stock market.
Said SMC Capitals Limited Equity Head, Jagannadham Thunuguntla, “With this revision, we may witness an era of takeovers in India. If promoters co-operate, takeovers will be friendly. Otherwise, the takeovers can be hostile. Eitherways, the stage is all set for a new takeovers regime in India.”
Out of the such 215 companies vulnerable for takeover, in the case of 76 companies, at least single shareholder owns between 10 per cent to 49.99 per cent. This means in case of these companies already there are big investors who are not with the promoter and if they decide they can quickly prowl on. “This is especially true considering the fact that the new guidelines have permitted the seamless integration between open offers and delistings, Thunuguntla said.
Some of the major companies ripe for hostile takeover according to SMC’s listing are as follows: Moser Baer — promoter holding is 16.29 per cent and the largest shareholder Warburg Pincus is holding 13.10 per cent; Apollo Hospitals —promoter 33.54 per cent and investor Apax partners 13.80 per cent; India Cements — promoter 25.18 per cent, investors LIC 13.44 per cent & HSBC 12.10 per cent; Polaris software — promoter 29.08 per cent and investor 26.98 per cent; Indiabulls Securities — promoter 29.88 per cent and investor HSBC Global 14.84 per cent.
In all these cases if the investors with large holdings decide to be aggressive and make a bid for 100 per cent of the company, it can be serious threat to the existing promoters.
Good thing is that the fear of being taken over may keep indian promoters on their toes, especially those who never bothered about minority shareholders, felt EMC.
It also thinks that the risk of takeover bids is higher from the foreign acquirers than the Indian acquirers because of the larger financial muscle of the former.