The Securities and Exchange Board of India (SEBI) is considering coming up with a new framework for delisting after an open offer is made.
As per the current norms, a mandatory open offer of 26 per cent is required for acquisition of shares held by all shareholders other than the acquirer, if the acquirer has agreed to acquire shares representing an entitlement to vote (25 per cent or more), or control over a listed company.
Upon such acquisition, the acquirer may possibly cross 75 per cent, which is the current maximum non-public shareholding under law. Further, rules stipulate a minimum public shareholding of 25 per cent for all listed companies and if this limit is breached, the non-public shareholding has to be brought down to 75 per cent within a year.
Also, in case the acquirer intends to dilute the stake, the promoter holding would first have to be brought down to 75 per cent and then would have to be to be increased to 90 per cent.
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As per a Sub-Group of the SEBI's Primary Market Advisory Committee (PMAC), the consecutive flow of public transactions would also confuse investors in the secondary market who need not already be shareholders in the listed company, with an offer to buy their shares, followed by an offer to sell shares to them, and then an offer to buy their shares.
"Such directionally contradictory transactions in a sequence pose complexity in the takeover of listed companies and dissuade an incoming acquirer from seeking to acquire control over listed companies," said the report of the Sub-Group.
The panel noted that there is indeed a need to streamline the operation of the Takeover Regulations, the SCRR and the Delisting Regulations. However, in the course of streamlining, one must not compromise on balancing competing interests, the report noted.
