IndiaCorpLaw

New 5% creeping acquisition permission for 55-75% holders to go soon?!

Further to posts here regarding amendment to SEBI Takeover Regulations allowing persons holding 55-75% to acquire further 5%, see report in ET dated 5th November 2008 that says that this permission may soon be reversed.

Readers may recollect that this new amendment allowing such 5% increase was without any time limit and also not a recurring annual feature. Apparently it was to allow Promoters to acquire shares from the market since the prices were, as per perception, too low. This mopup may help restore prices to what they think are fair prices.

Now the ET report is like a "Last few days of SALE – buy quickly" signboard! Whether Promoters will respond is to be seen.

The ET report also shows how multiple authorities may come in each other's way and at times even carry on a perverse turf war. The Finance Ministry's logic for the demand for withdrawal of this amendment is that the public's holding would go down to below minimum public holding . Why, would you ask, should the public holding go down below public limits when the maximum limit for Promoters' holding is 75% even after the amendment? That is because the Finance Ministry wants to treat some categories of shareholders as non-public shareholders though as per SEBI's definition, these would fall under public shareholding.

The ET report is actually about the Finance Ministry's decision to defer the proposal to delist companies who do not have minimum public holding. ET says that this deferment is because the Ministry feels that the prices of shares today are too low and interestingly, a study by the Ministry has "revealed" that there is no relationship between Q1 and Q2 corporate profits and the "sharply lower valuation of blue-chip scrips". The Finance Ministry might "reveal" the "fair prices" of these shares so I can borrow and then rush and buy them!

– Jayant Thakur

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