Investors and promoters could well have received their Diwali gift as the Securities & Exchange Board of India (Sebi) has now changed the limit on creeping acquisitions taking it to 75% from the 55% earlier. This, say market experts, may prompt promoters to up their stakes and also act as a support to the market price in these tumultuous days.
Experts also see this as one of the unconventional or unorthodox moves, as hinted by the finance minister, to support the markets from sliding away. Minister Chidambaram had indicated that the regulators would do all that it takes to maintain strength in the economy and the markets.
This move comes in at a time when many promoters have complained to the regulator to probe into incessant and irrational beating down of their share prices, without any relation to fundamental factors.
Now, the promoters can, if they think that the fundamental valuations are compelling, increase their stake through the open market till they reach a 75%, subject to a 5% per year limit. Earlier, an acquisition of over 55% meant that the management had to compulsorily make an open offer. They don’t have to do so now and this might prompt certain set of promoters, especially those with strong cash reserves, to up their stake in case there is a huge price fall. Also, if promoters start buying at lower levels, it could support further ‘shorting’ and help arrest a share price fall.
“At the moment there just no buyers in the market place. With this move, at least one set of buyers would emerge,” says Harish Pathak a Mumbai based stockbroker.
Moreover the Sebi has mentioned that these ‘creeping acquisition’ deals will have to be done through the open market and will not be a bulk deal or even an off market deal.
The Sebi directive mentioned that, earlier, for any increase in the holding of promoters pursuant to buy back, exemption was required to be sought.
“It has now been decided to automatically exempt increase/ consolidation up to 5% per annum as a result of buy back by a company.” This could then act as another encouragement for the management to use this window of opportunity.
Now, it remains to be seen how many would actually use this, says a fund manager. But, it would make some of the speculators wary of rampantly beating down a share. At the moment it looks like a win-win and surely a welcome move, he adds.
Even preferential allotment and negotiated deals do not fall under this category.
---
source:FE
---
No comments:
Post a Comment