SEBI in its board meeting has taken many decisions which would help minority shareholders in buyback and also ease complex rules and categories of foreign investors in India.
The SEBI board meet on Tuesday the 25th June took many decisions. Some of them are highlighted below.
Buyback of Shares
- Minimum quantity to be bought back increased from 25% to 50%.
- Period of offer reduced from 12 months to 6 months.
- An amount equal to 25% of the buyback amount to be deposited in an escrow account.
- In case of minimum buyback not being achieved 2.5% of the buyback amount to be forfeited.
- No fund raising for 1 year after closure of buyback.
- In case of buyback of 15% or more of capital it can be only by way of tender offer.
The last point is very significant as we have seen in innumerable cases that the market buyback does not enhance shareholder value. The buyback terms are at a maximum price and the market price seems to hold during the buyback period. In this case there is a definite price at which the shareholder would be able to offer his shares and exit.
The some and substance of changes in Buyback mean that the promoter has to be serious about the buyback. Mere announcement from a market timing perspective would not help.
Preferential Offer
To increase transparency they have made it mandatory to allot all shares in a preferential offer only in demat form and they must be paid for from theallottee’s account. Secondly the lock-in period would begin from the date that trading permission is given by the stock exchanges and finally the ultimate beneficial owner’s name would be disclosed.
The regulator has made many changes with respect to foreign participants in India’s markets as well. The entire press release is enclosed below.
