Here are a few reactions to the SEBI amendments to the Takeover Code:

Satyen Shah, Head, Equity Capital Markets, Edelweiss Capital Ltd : Mandatory open offer size raised to 26 per cent from 20 per cent: “Welcome step, especially since the SEBI has brought it down from the 100 per cent that was recommended by the Achutan Committee as it would have made acquisitions too expensive, especially for Indian promoters who do not have access to bank funds for acquisitions.

Trigger point 25 per cent from 15 per cent: Welcome decision since it makes investments by PE funds easier. The earlier requirement made it too limiting for PE funds to invest in small or medium cap companies.

Non-compete fees abolished: “While SEBI has accepted the equality among investors that was the basis for this recommendation by the committee, abolishing of non-compete fees or control premium will pose problems. The fact is very often people with a considerable stake in a company signify some extra value for the acquirer — that person could be a technology innovator, a progressive leader and/or manager with in-depth understanding of the business and the environment, etc. A control premium/non-compete fee is often recognition of this reality. With non-compete fees abolished, what is likely to happen is that promoters may look to issue different classes of shares — a practice that is legal in India, but almost never followed — to ensure a premium.’’

Mr Ashish Bhakta, Partner, Advaya Legal on New Takeover Code : “Scrapping the non-compete fees under the Takeover Code in my humble opinion is of no actual relevance, either to the investor or the regulator, both of which the recommendations seek to protect. The acquirer may just find that the promoters and management competing with the acquirer who has just paid a huge amount (especially in view of the increased threshold limit) to acquire the business and its knowhow and channels.’’

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