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Sunday, Dec 22, 2002

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SEBI eases pricing norms for PSU disinvestment — 2-week average price criteria not applicable

K.R. Srivats

NEW DELHI, Dec. 21

THE Securities and Exchange Board of India (SEBI) has formally relaxed the pricing norms of an open offer to be made by an acquirer in cases of public sector disinvestments.

SEBI has, effective December 18, amended its takeover code to specify that the existing norm of "average of the daily high and low of the closing prices of the shares during the two weeks preceding the date of public announcement" will not be applicable in the determination of the offer price in the case of disinvestments of a PSU.

Hitherto, the average of the 26 weeks share price or the average of the last two weeks' prices - whichever is higher, was considered as one of the measure for arriving at the open offer price in PSU disinvestment transactions.

With the latest change, the open offer price in the case of PSU disnvestment will be the highest of the negotiated price or the 26-week average price or the price paid by an acquirer for acquisition, if any, including by way of allotment in a public or rights or preferential issue during the 26-week period prior to the date of public announcement.

The Disinvestment Ministry had approached SEBI to review the pricing norms of open offer made by an acquirer of Government holding in a strategic sale transaction relating to a PSU. Some bidders contended that share prices of PSUs could be pushed up during the two-week period to ensure a high open offer price. The latest move of SEBI is one of the many concessions doled out by the capital market regulator for facilitating a smooth execution of the disinvestments programme of the Government.

The regulator has already ruled that counter offer cannot be made to an open offer made by a strategic partner in a PSU disinvestment transaction. Further, any additional stake acquired by a strategic partner in a PSU will not invite an open offer under the takeover code.

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SEBI eases pricing norms for PSU disinvestment — 2-week average price criteria not applicable

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