Brokers registered with the Securities and Exchange Board of India as corporate entities before 1997 may be exempted from registration fees prescribed by the market regulator.
According to brokers, who appealed before the Securities Appellate Tribunal, the hearing on the fee continuity issue was over and the tribunal was expected to come out with a final order soon.
They added that the tribunal was planning to extend the fee continuity benefit to brokers, albeit with stringent riders.
As per the new order, any broker who had corporatised and had to take fresh registration with Sebi as corporate entity, would get the benefit, irrespective of whether the stock exchange was corporatised.
Among other conditions, the benefit will be available to those brokers, who had registered as corporate entities under the Companies Act 1956 and hold at least 40 per cent holding in the new corporatised entity and the broker is a director in the new firm.
Sources explained if this was allowed, the benefit would be available since 1992 which was when the practice of registration of brokers started.
Thus, April 1, 1997, which was fixed by Sebi as the date for fee continuity benefit will be extended to brokers seeking fresh registration after corporatisation, would not apply any more.
Sources added that this might amount to a loss of around Rs 100 crore (Rs 1 billion) to Sebi as these brokers had already registered with the regulator after it declined to extend the fee continuity benefit to these brokers corporatised before 1997.
Sebi amended the regulations on stock broker and sub-broker fees in 1997 to promote corporatisation of stock exchanges.
As per the new amendment, Sebi had ruled that those brokers who had corporatised in 1997 did not need to pay afresh. It declined to extend the benefit to those brokers who had corporatised before 1997.
"Typically, this is a sign of good times. The industry is consolidating through mergers and acquisitions and open offer is an ideal route for consolidation. Besides, cash-rich corporations are using liquidity to buy back shares. When you do not have any expansion plan, buying back shares is possibly the best way of rewarding shareholders as it shrinks the equity base and hence return on equity goes up," said the company secretary of a Mumbai based corporate house.
Nine open offers were made in April alone, with a total value of Rs 2,609 crore (Rs 26.09 billion). Swiss cement major Holcim's open offer for Gujarat Ambuja Cement, which closed recently, is one of them.
Last year, Holcim had made an open offer for ACC shares. In terms of value, open offers made in 2005-06 were the second highest over the last one decade. In 2002-03, 82 open offers were made involving Rs 6,120 crore (Rs 61.2 billion).
The open offers are generally made with the objective of change in control, consolidation of holdings and substantial acquisition of shares. Between April 1997 and March 2006, 642 open offers have been made involving over Rs 26,000 crore (Rs 260 billion).
Analysts said the number of open offers would grow as more and more companies looking for consolidation.
"A few years back, when the stock markets were subdued, some of the promoters used the opportunity to hike their stake in companies. Now, the reason for an increasing number of open offers is entirely different. Promoters are increasing their holdings to cash in on the prospects of the firms," pointed out an analyst. Said Mihir Vora, head of equities, ABN AMRO, "This is a sign of high business confidence."
In the last financial year, Oracle made the biggest open offer of Rs 1375 crore (Rs 13.75 billion) to I-flex shareholders for 20.75 per cent stake in the company. The Anil Ambani group paid Rs 1,188 crore (Rs 11.88 billion) to acquire 25.28 per cent in Reliance Capital and MHM Holding, Germany, offered Rs 335 crore (Rs 3.35 billion) for 20 per cent stake in Mico Inks.
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