| Damodaran: More headroom
Mumbai, Dec. 30: The Securities and Exchange Board of India (Sebi) today allowed promoters to raise stakes in their companies to 75 per cent by removing restrictions on market purchases.
Earlier, the promoters’ stake in firms was capped at 55 per cent. Promoters can now use the creeping acquisition mode to raise their stakes but with the rider that they also come out with an open offer.
It is possible that a combination of open offer and creeping acquisition could lead to a promoters’ stake of more than 75 per cent, which would infringe the Sebi rule that at least 25 per cent of the stock should be in non-promoter hands. In such situations, the promoters will have to restore the minimum public shareholding through the framework set out in the revised Clause 40A of the listing agreement, Sebi said in a note issued today.
Companies have been showered with other incentives as well. Firms that are already listed on the bourses and are planning to come out with a follow-on offering have been spared some of the rigours that come in the form of disclosures which need to be made in the prospectus and offer documents.
Sebi chairman M. Damodaran said the restrictions on market purchases and preferential allotments as in the Takeover Regulations have also been removed.
Therefore, even as promoters can now take recourse to the creeping acquisition route to beef up their holding, the market regulator said in the case of a takeover, the outgoing shareholder (promoter) can sell his entire stake to the incoming acquirer. Also, shareholders holding more than 55 per cent would be able to make further acquisitions, subject to an open offer.
Sebi has also decided to permit a grading system for new issues. Any of the four credit rating agencies in the country will be allowed to grade issues from unknown promoters, thereby providing a measure of comfort to investors. However, the issuer has the option of deciding whether or not he wants to go in for such a grading.
The market regulator also made a fresh stab at introducing a system of having a unique identification number for large investors. Sebi also unveiled two models for the introduction of gold exchange traded funds in the country.
The Sebi chief was, however, firm in his stand that the regulator's rule of having a minimum 25 per cent public shareholding would stay.
Damodaran said the grading system for IPOs would be a one-time exercise and it would only focus on assisting the investor, more particularly, the retail investor in taking an informed investment decision.
Investors have other reasons to cheer about as well. Sebi has decided to extend the facility of electronic transfer of funds,
Damodaran said the December 31 deadline for listed companies to pack their boards with 50 per cent of independent directors under Clause 49 would not be extended. However, it increased the maximum time gap between two board meetings to four months from three months. Damodaran, however, added that firms will have to hold at least four meetings in a year.
The position limits for stock-based derivatives were also raised to enable market participants to hedge their positions more effectively, especially for stocks with large market capitalisation and higher liquidity.