Mumbai, July 19: Indian corporates will have to be on their toes once the new takeover code comes into effect. The recommendations for a new Takeover Code 2010 presented to the Sebi chief Mr C.B. Bhave on Monday morning has recommended that the trigger limit for an open offer should be raised to 25 per cent from 15 per cent at present and the open offer size at 100 per cent against the present 20 per cent.
“Hostile takeovers which were hitherto difficult in India could now become the norm,” said Mr Jaganna-dham Thunuguntla of SMC Capitals Ltd. It is not possible now as the acquirer could not acquire more than 75 per cent. Now that the acquirer/investor can go upto 100 per cent, it will become easy to buy out companies. They can takeover the company, delist and do what they want with it and come back in two to three years with an IPO by which time valuations would have increased. This is what leveraged buyouts are all about and it is the name of the game globally, said Mr Thunuguntla.
He said one school of thought is that it can lead to huge outflow for these investors to
do 100 per cent buyouts. However considering the appetite for Indian assets among global investors like hedge funds, and private equity funds, it can be assumed that these investors won’t shy away from such a prospect.
Welcoming the move, Mr Hinesh Doshi, an official of the Investors Grievances Forum, said there should be a different pricing for minority shareholders. Neg-otiations on price are done between the promoters and the acquirers and the minority shareholders do not have a say. There should be a book building process for at least the minority shareholders.