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Investors, chambers at odds over creeping acquisition

Our Bureau

MUMBAI, Dec. 14

INVESTOR associations and chambers of commerce

are divided over the issue of raising the creeping acquisition limit from the existing five per cent.

At a meeting with the Bhagwati panel on takeovers on Wednesday, the associations remained divided on the issue of whether the creeping acquisition limit should be increased, whether there should be a limit at all and whether there should be a lock-in per iod.

The creeping acquisition limit has assumed significance for corporate India against the backdrop of the recent hostile takeover attempts.

In an informal chat with the media, the SEBI chief, Mr D.R. Mehta, said that it was the first time that industry and investor associations had come together to share a common platform.

The issue of whether open offers should be made mandatory for 51 per cent, 100 per cent or the current 20 per cent was also discussed.

According to the SEBI Chairman, while the investor associations were in favour of retaining the 20 per cent open offer rule in a bid to protect investor interest, the industry associations were in favour of increasing it to 51 per cent.

``There was greater support to leave it untouched at this point of time. However, investor associations have suggested that preference be given or a small investor clause be worked in keping in mind the interest of the small investor vis-a-vis the instit utional investor in the case of open offers,'' he said. This way every small investor is given an exit route.

Another suggestion made by the investor associations was that special proviso be made for professionally-managed companies to protect them from hostile takeovers.

The associations also suggested that in the case of takeover attempt by foreign companies, the code should clearly define the rules. Currently the takeover code deals with such instances on a case-by-case basis. One of the suggestions made was that in su ch instances, the promoters should not participate in voting.

The other issues discussed included whether someone violating the takeover code or making an acquisition in violation of the takeover norms be allowed to retain the acquisition made by him or not. If not, the procedure needed in such a case should be spe lt out.

``There was a suggestion that in the case of illegally acquired shares, voting rights should be frozen. However, we are not clear whether it is legally feasible under the Companies Act,'' Mr O.P. Gahrotra, Senior Executive Director, SEBI, said.

The associations concluded that there appeared to be no need to tinker with the takeover code.

``By and large, the existing proviso have stood the test of time. There is no single formula to fit every situation and solve all problems. Any proposition will have cases that do not fit,'' Mr. Gahrotra said.

The takeover panel will further deliberate on these suggestions at the next meeting.

It is holding a separate meeting tomorrow with parties against whom unsolicited or `hostile' bids have been made. ``We are meeting with companies that have gone through hostile takeovers i.e., the acquirers and the acquired companies,'' SEBI officials sa id.

Of the nine companies invited, Mr Abhishek Dalmia and Mr Nusli Wadia have confirmed their presence at the meeting.