The Hindu Business Line : FICCI protests SEBI move to curb promoters' holdings

THE amendment to the Takeover Code by SEBI, which seeks to bring down the ceiling on acquisition of shares through market purchases and preferential allotment from 75 per cent to 55 per cent for promoters of companies, has irked India Inc.

Terming the move as ill-advised and likely to impact stock prices, FICCI said this would entail heavy loss to promoters and lower realisation on sale of shares by non-promoter shareholders.

It would also deny a level-playing field to Indian entrepreneurs, FICCI added. In a note to the regulator, it said the ceiling and creeping limits of acquisition had been tinkered with no less than five times in the last eight years.

"This has spelt instability in the corporate sector, as forcing the promoters to divest voting shares held in excess of 55 per cent is seen as arbitrary and detrimental to the healthy growth of the stock markets."

The promoters will not only lose heavily on forced sale of shares, they would incur heavy cost in case they desire to acquire shares over and above 55 per cent, since the minimum public offer is 20 per cent.

FICCI said at a time when FDI is sought to be encouraged and is permitted up to 100 per cent in a few cases and up to 74 per cent in a number of cases, the Indian entrepreneur should not be unduly denied a level-playing field by forcing reduction of promoters' holdings from 75 per cent to 55 per cent. "There is a general feeling on the part of the corporate sector that the regulators are interfering too much in the affairs of corporates. The current 75 per cent limit is quite reasonable and should be continued. However, if the SEBI wants to reduce the same to 55 per cent, it has to be done on a case-to-case basis," it said.

Further, the revised regulations have also tightened the definition of promoters. The scope has been widened to include any individual, spouse, parents, brothers, sisters or children and any company in which 26 per cent or more of the equity share capital is held by the promoter and persons acting in concert. This is a very stringent norm. SEBI must, therefore, review the revised definition of the term promoter, it said.

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