Hinting at more trouble for the proposed buyout of 24% stake in Jet Airways by Abu Dhabi carrier Etihad, Sebi chairman UK Sinha on Tuesday said any entity acquiring “control” of a listed Indian company would need to make an open offer for public shareholders even if it is below the 25% threshold of the trigger.
While he did not specifically comment on Jet-Etihad deal, he said that Sebi’s position is very clear about any deals involving substantial acquisition of shares and takeovers.
“Sebi will be looking into any case where there is a suspicion or belief that control has been acquired. Sebi will apply its tests and take a decision accordingly,” he said.
Seperately, Sinha also said that stringent action will be initiated against the companies which do not comply with the minimum listing norms prescribed by Sebi. The chairman further added that finance ministry has assured Sebi that all public sector entities will offload government stake in line with the 10% public float regulation. Almost 10 PSUs still need to achieve 10% public float by sale of shares cumulatively worth about R3,000 crore.
As per the takeover regulations, any entity acquiring a 25% or more stake in a listed company needs to make a mandatory open offer for purchase of additional 26% shares from the public shareholders. Sebi rules define ‘control’ as “the right to appoint majority of directors”.
The cabinet is expected to shortly adopt the new definition of control under the new companies bill along the same lines. The Bill defines control as “the right to appoint majority of the directors or to control the management or guidelines decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner”.
Although as per the proposed deal between Jet and Etihad, the Abu Dhabi carrier is acquiring 24% stake in the Indian airline company, which is below the threshold limit of 25%. However, Sebi has raised concern that Etihad was getting voting rights and other powers in excess of those equivalent to its proposed 24% stake.