The Hindu Business Line : SEBI seeks clarity on acquisition of firms via secondary market

NEW DELHI: Concerned over Mauritius-based investors taking over Indian firms through secondary equity markets, stock market regulator SEBI has sought clarifications from the government on whether such investments should be construed as FDI or FII to remo ve ambiguity in rules.

The market regulator has written to the Department of Industrial Policy and Promotion (DIPP) in the Commerce and Industry Ministry for this purpose and the matter is being examined, official sources said.

Foreign institutional investors can raise their stake in an Indian company beyond 24 per cent if the concerned company's board passes a special resolution to that effect.

At times, domestic companies are virtually taken over through the FII route, the sources said, adding that SEBI has sought clarification on whether such acquisition were not to be treated as FDI so as to ensure norms are not violated.

While issues of FDI are dealt by DIPP, issues regarding FIIs are handled by the Finance Ministry. DIPP has been in talks with RBI to sort out the issue for a few months, sources said.

While the RBI looks at pricing of shares in such takeovers, SEBI's concern is limited to compliance with the Substantial Acquisition of Shares and Takeovers Regulations of 1997. - PTI

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