Sebi revises takeover norms

The Securities and Exchange Board of India on Tuesday revised takeover norms by bringing ADRs/GDRs with voting rights on par with the domestic shares, which makes an open offer mandatory if 15 per cent stake is bought in a company through these securities.

The revised norms may have major ramification on the fate of proposed Bharti-MTN deal as both the parties hammering out the contentious issues including the open offer.

At present, an open offer is triggered by holding of ADRs/GDRs (American and Global Depositary Receipts) only if they are converted into domestic shares with voting rights.

The purchase of 15 per cent domestic shares also makes it mandatory for the buyer to make an open public offer to buy an additional 20 per cent equity in the company.

Following the revision of regulations, buying 15 per cent ADRs/GDRs would also trigger an open offer, provided these securities have voting rights attached with them, Sebi chairman C B Bhave told reporters after the board meeting.

For ADRs/GDRs without voting rights, an open offer would be triggered only after their conversion into domestic equity shares with voting rights, he added.

The revision is in tune with the market developments, Bahve said, adding that the amendment will be applicable from the day it takes place it would not be effective retrospectively.

The Sebi board has also decided to extend the concept of 'anchor investors' to issue of Indian Depository Receipts (IDRs) on similar terms as applicable to public issues made by domestic companies.

The board said that at least 30 per cent of the issue size of the IDRs will need to be reserved for allocation to retail individual investors, who may otherwise be crowded out, Bhave said.

Meanwhile, in a bid to ensure the corporate restructuring schemes follow the accounting standards, Sebi said a listed company undergoing corporate restructuring (amalgamation, merger, demerger) would submit an auditor's certificate to the stock exchange saying the accounting treatment followed in respect of financials contained in the scheme is in compliance with the accounting standards.

This requirement would be prescribed by amending listing agreements, Bhave said.

An unlisted company undergoing similar corporate restructuring and proposing to make an IPO would have to make disclosures in the prospectus. This will also be mandated through the Sebi regulations.

Image: Sebi chairman C B Bhave. Photograph: Reuters