Rare & Exclusive: SEBI's Usha Narayanan on M&A

Q: The other point that has come up in a lot of conversations whether the trigger limits want to be enhanced considering that controlling stakes in companies in India now or today are at a very different level than they were when the code was written in 1997, do you believe that there is case for an upward movement of those triggers to 20 or 25 I am not trying to pin you down to a number but do you believe there is case for an upwards movement?

A: Given the realities of today, that is a key element that has been thrown out for discussion so you will wait to see what is coming out of it and to be fair maybe we have crossed the 15% streak because that was at the back of the CCA Era and today the promoters or most of the companies are controlled with more than 15% stake so it would have to have some correlation to the average promoter holding that the Indian listed companies that there are.

Q: The other thing I heard you mention and noticed was drawn again from the deliberations of the panel was that most jurisdictions across the world do not allow for any special payment for controlling share holders what we tend to call in India as a non compete payment, is it time for that now to go out of the window and for all share holders therefore to get one price irrespective of whether they are controlling or the minority as is the case in many jurisdictions?

A: I suppose so because equality of treatment is one of the key factor of the take over regulations and our own search shows that no other country has what is being called a non-compete fee being paid to the selling share holders and it is being paid to the key management personnel so that they don't go and join a rival group and things like that. It's more by way of a compensation package and whatever you cal but not as a part of the selling share holders but the only problem in India is that most of the selling share holders also happen and that makes the event a little more difficult but we will have to think about it and see how to get it done.

Q: But do you personally believe that based on the numerous cases that you have seen in the last many years that it is probably time now to offer one standard payment to all share holders?

A: I should think so.

Q: Let me take this forwards to the next point which is exemptions and I think that is much in saying and said about making certain situations as standard exemptions for instance as buybacks which are still cleared on a case by case basis, do you think it should become a part of the automatic list of exemptions?

A: We have allowed up to 5% but it goes beyond that when it comes to case by case basis because personally we feel even if we buy back its not an involuntary acquisition because whether to tender share or not, so it's the share holder's decision to tender or not to tender and what kind of buy back offer you go for a tender offer or you go for an open market purchase even that is decided by the management or the person in control so that is where we feel that automatic exemption may not be warranted.