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November 1, 2001 		Feedback  
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SEBI mulls easing PSU open offer rules

The board of market regulator Securities and Exchange Board of India on Thursday began a meeting to decide on easing open offer rules for public sector undertakings, which are being privatised.

A senior SEBI official told Reuters that divestment secretary Pradip Baijal will make a presentation to the board urging a relaxation in the formula used to determine the open offer price, after the government divests stakes in companies.

The board will also discuss SEBI's annual report for the year ended in March and the ban on former Bombay Stock Exchange president Anand Rathi, who was prohibited from trading in March.

Under Indian takeover rules an acquirer who has gained control of a company by buying 15 per cent or more of its shares -- directly or indirectly -- must make an open offer to buy a minimum of 20 per cent from public shareholders.

This is also mandatory on successful bidders under the government privatisation programme.

Under current rules, the open offer price must be the highest of: The average price over 26 weeks prior to the announcement or the negotiated price of the stake sale, and two other criteria.

CMC OPEN OFFER

The Economic Times said on Thursday without naming sources, that the divestment department wants SEBI to alter the pricing formula by pegging the open offer price at the price at which the government stake is sold to the acquirer.

The paper said the suggestion was made after divestment of computer maintenance and software company CMC Ltd last month.

It said market speculators pushed up the stock price -- to a high of Rs 340 in September from a low of Rs 191.55 -- ahead of its divestment and as a result influenced its open offer pricing formula.

The government sold its 51 per cent stake in CMC to Tata Sons at Rs 197 per share in early October but the acquirer had to make an open offer at Rs 281.26 per share because of the sharp price movement ahead of the announcement.

Last month, Divestment Minister Arun Shourie said the government would probe the surge in the price of CMC Ltd prior to its privatisation.

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