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The current
law is regressive against the Indian promoters, said leading
industrialists. Citing the case of creeping acquisition
limit of 5 per cent per year for the Indian promoters, they
demanded that why not this limit is moved at least up to 51
per cent. “Since there is no change in the management, why
is it mandatory for the promoters to give open offer for 20
per cent, in case, they acquire more than 5 per cent,” they
argued.
Bharat Banka, joint president Aditya Birla group, contended
that, in the given legal framework, many leading Indian
corporates are vulnerable for acquisition. The company
management should be given a level playing field against any
hostile bids.
Under the SEBI Takeover and Acquisition act, once the
acquisition bids are triggered, the board of the target
company has no legal authority to enter into any agreement.
Unlike this in the developed countries, the board has such
power. Like in case of Arcelor, when Mittal triggered the
hostile bids, Arcelor did acquire a company in Canada,
entered into a definitive agreement with Russian steel giant
Severstal and also had declared special dividend. These act
as poison pills against the predators. But, the Indi an
companies are not allowed to do any of these. Under the
Indian system, the moment takeover bid is trigger, it makes
the board complete defunct and parlays.
Sources in the Tata group also pointed out that there was no
defense mechanism available for the Indian promoters/
management as they were in the developed market. In fact
Press Note 1 has also been done away early this year and now
allow RBI to vet such bids.
Under Press Note 1, the board of directors was entitled to
either accept or reject the acquisition bids. And in case of
rejection, the predator can go ahead with its bids and get
the approval in the shareholders meeting. Under the new
dispensation, RBI clearly states that if any bids meet the
SEBI guidelines on takeover and acquisition, it will be
allowed. Therefore the board does not have any power.
Further, after the recent upheaval in the stock market, the
RBI has clamped down on lending against shares. India Inc.
argued why the borrowing against shares at least for the
purpose of enhancing the equity stakes is not being allowed?
The government should not play any active role but at the
same time it must allow a conducive and equitable
environment for the existing management to protect their
base. Citing the case of Indian Hotels, which has a market
cap of less than Rs 6,500 crore, analysts said the value of
all the properties owned by this company would be more than
four times its market cap. Similar is the case for L&T and
many more.
Proposed powers Creeping acquisition limit of 5 % for
promoters should be removed Even after hostile bids are
mounted, board of director should be allowed to enter into
definitive agreements Board approval should be allowed
Lending against shares for enhancing promoters holding
should be allowed. |
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