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SEBI revises takeover norms; ADRs, GDRs on par with shares

Published on Tue, Sep 22, 2009 at 17:47 | Source : CNBC-TV18

Updated at Wed, Sep 23, 2009 at 09:04

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CB Bhave, Chairman, Securities Exchange Board of India

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The Securities Exchange Board of India (SEBI) has revised its takeover norms provisions. In a press conference, Sebi, Chairman, CB Bhave said the board has approved two changes in the Indian Depository Receipts (IDR) norms and has allowed the concept of anchor investors for IDRs. He added that the takeover regulation were applicable for American Depositary Receipt (ADR) as well as Global Depositary Receipt (GDR) holders with voting rights. He said that GDR/ADR holders with voting right would now be on par with shareholders but added that there would be no retrospective effect to the amendment on takeover norms.

India had introduced a formal takeover code in 1997. However, these rules left scope for interpretation leading to many disputes.

HP Ranina, Advocate, Supreme Court said the rule was unique. "I think Sebi is within its right if they want to do this." He added that Sebi has raised serious issues with these changes and feels the regulatory bodies would have to rethink the entire deal.

Here is a verbatim transcript of Sajeet Manghat's comments on CNBC-TV18. Also watch the accompanying video.

In a landmark decision the Sebi board decided to close the loop hole existing in the GRD/ADR route and in doing so the Sebi board today decided to ensure that if the GDR and the ADR have voting rights they would be taken at par with the domestic shares and that means that if any individual or any entity which owns GDR or ADR with voting rights crosses its limits of 15% as applicable in the domestic shares they would be required to come out with a 20% open offer.

Now this decision or amendment to the GDR/ ADR route is important because the current on going big deal which is Bharti-MTN is hinges on the issue of GDR to MTN and MTN shareholders as per the last announcement made by Bharti Airtel so in that context it is very important decision and it is a big blow for Bharti's current structure which had disclosed to the market and the shareholder's there. In short it is basically a big decision by Sebi and Sebi had to go ahead and take decision in favour of the retail investor and the other minority shareholder to ensure that they get the same right. The company does not use this route or misuse this route to avoid an open offer for minority shareholders.

When quizzed about the Bharti-MTN deal, Bhave was candid and said that he does not comment on any specific deal to any specific companies and that has been his policy for so long, for the last one and a half- two years that he has been. Sebi does not comment on specific issues of specific companies there. He said that this policy decision had been taken after a lot of debating which within Sebi and was taken in favour of the retail investor or the minority shareholders because at the end if the open offer does not happen it is the minority shareholder which would be will at a loss. Sebi has always taken a decision in favour of minority shareholders and that is the reason this announcement has come a days away from the Bharti-MTN announcement or the preliminary announcement which was expected by the market.