Market analysts have welcomed the measures announced by
Sebi on Thursday regarding the
new Takeover Code and other investor-friendly measures, saying the steps are pragmatic.
On the new open offer limit, which Sebi brought down from the proposed 100 per cent to 26 per cent but above the existing 20 per cent, Edelweiss Capital Head (Equity Capital Markets) Satyen Shah said, this is a welcome step as it makes acquisitions attractive.
He also pointed out that had Sebi agreed to the Achutan committee report, which called for 100 per cent open offer, this would have made acquisitions too costly, especially for Indian promoters who do not have access to bank funds for acquisitions.
He also welcomed the new trigger point at 25 per cent against 15 per cent saying it makes investments by PE funds easier. The earlier requirement made it too limiting for PEs to invest in small or medium cap companies.
MUST READ: Sebi announces new takeover norms; open offer trigger raised Consultancy firm Corporate Professionals MD Pavan Kumar Vijay said, "The new takeover regulations is a good move in the direction of simplification of the complicated law. The new open offer trigger point at 25 per cent is also a good move for increasing fund raising options and joint ventures".
On the new open offer size, Vijay said Sebi has decided to increase open offer size to only 26 per cent due to "industry pressure against the 100 per cent offer size recommendation of Achutan Committee. Though logic of 26 per cent is not known, the move is good for domestic promoters and industry as cost concerns and funding of offer is addressed to a major extent".
However, Vijay said abolition of the non-compete fee is not in the right spirit "as promoters cannot be treated as right in all cases. Where the promoters have real personal contribution in business, non-compete fee is logical".
Edelweiss's Shah also said this abolition of the non-compete fee or control premium is not a right move as it can pose problems, though prima facie Sebi has accepted the equality of investors.
"The fact is that very often, people with a considerable stake in a company signify some extra value for the acquirer - that person could be a technology innovator, a progressive leader and/or manager with in depth understanding of the business and the environment, etc. A control premium/non-compete fee is often recognition of this reality.
"With non-compete fees abolished, what is likely to happen is that promoters may look to issue different classes of shares - a practice that is legal in India, but almost never followed - to ensure a premium," Shah argued.
Shah described the proposed uniform KYC norms as "an extremely welcome development as this has been a big impediment in financial inclusion".
Mutual fund players gave a big thumps up to the Sebi saying this is big relief. Reliance Capital Asset Management Chief Executive Sundeep Sikka said: "This is a great step in right direction and will help to get retail investors back in the industry who have not been serviced by distributors in last two years".
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