NEW DELHI: The Securities and Exchange Board of India (SEBI) chairman UK Sinha on Tuesday said that any entity acquiring control of a listed Indian company would need to make an open offer for public shareholders.
The statement is significant considering that the market watchdog is looking into Etihad’s acquisition of 24% stake in Jet Airways if there is any change in control.
“I am not talking about any specific deal, but Sebi is very clear on such issues. If somebody has acquired stake in a company beyond a certain threshold then the acquirer has to make an open offer to others,” Sinha said, adding that even if the acquirer has got less than the threshold but he has got the control over the company then also he has to make an open offer.
As per the proposed deal between Jet and Etihad, the Abu Dhabi based carrier is acquiring 24% stake in the Indian airline, which is below the open offer threshold limit of 25%. However, there are concerns that Etihad will exercise significant control over Jet Airways through the board.
“So, Sebi will be looking into any case where there is a suspicion or belief that control has been acquired. It will apply its tests and take a decision accordingly,” said Sinha.
As per the existing regulations, any entity acquiring 25% or more stake in a listed company needs to make a mandatory open offer for purchase of additional 26% shares from public shareholders. Open offer obligations also apply to the entities acquiring ‘control’ of a listed company with a stake less than this threshold limit of 25%.
Sinha said the market regulator has also received some suggestions about how the process of reverse book building is allegedly being misused by certain sections. The market regulator said that SEBI is the first agency which comes to anybody’s mind if there is any issue about investor protection.
“When some company, which was not even registered with Sebi, raises money from ordinary investors in the country, for example in West Bengal, people start blaming Sebi,” he said adding that Sebi always steps in to safeguard investors’ interest.
Sinha said that the government has assured it that all PSUs will comply with the minimum 10% public holding norm, adding that the regulator has already started the process of a relook at the existing delisting norms.
“We have already started the process of relooking at it (delisting regulations)… The work is going on,” he said.
Without naming the Sahara group, Sinha gave example of “a large company”, which raised more than $4-5 billion from more than 30 million investors.
“And the company claims it was a private placement. Now, how a private placement can reach out to 30 million people is another question?” the Sebi chairman wondered.