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India Inc will get another opportunity on April 21 to put forth its viewpoints on the proposed changes to the takeover code.
The Finance Ministry has convened a meeting of industry representatives on Thursday to discuss the issues relating to the SEBI appointed Achuthan committee report.
The Achuthan committee had recommended that any open offer under the proposed takeover code should be for 100 per cent, i.e., for all the shares held by all other shareholders of the target company. In the current dispensation, the open offer size is pegged at 20 per cent which is in line with international practice.
Corporate India was very concerned over the Achuthan Committee's recommendations relating to the open offer size.
SEBI had recently said that the maximum feedback had been received by it on the issues of 100 per cent open offer and non-compete fees.
A 100 per cent open offer rule would be demonstrative of the seriousness of the acquirer besides being equitable to the interests of the minority shareholders.
However, a section of Corporate India (industry associations like FICCI) had submitted to the capital market regulator that the 100 per cent acquisition rule would make acquisitions an expensive proposition for companies. This rule should be deferred or phased in as and when Indian industry is allowed to avail acquisition finance locally, it was submitted.
It was pointed out that greater clarity was required on how this rule would be applicable in the case of FDI caps in certain sectors.
The Achuthan committee report had also recommended that the initial acquisition threshold for a mandatory open offer be raised to 25 per cent of voting capital of the target company. India Inc is largely in favour of such a move as it would align more closely with the global practices in countries such as Europe, Singapore and the UK. Mandatory offer is triggered in these countries when the acquirer's stake reaches 30 per cent.
India Inc is of the view that the new threshold (25 per cent) will support capital inflows from private equity players.
This is because the private equity players will have an additional 10 per cent to acquire without the added obligation of an open offer.
The Achuthan Committee had submitted its report in July 2010. Indications are that Finance Ministry will use the deliberations to firm up its final views on the recommendations. The SEBI Board is yet to take a call on the recommendations.
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