A Mid Path Between Sebi Takeover Code and FDI Sectoral Cap
In the midst of searching a way out to enable the Indian Companies to raise FDI on the one hand and to enable the foreign investor to invest in Indian Company by ensuring the compliance of the contradictory provisions of SEBI Takeover Code and FDI Sectoral Cap, the Government is of the view that foreign investors who wish to invest in listed Indian companies that operates in sectors where FDI sectoral cap is at 26% or 49% will be advised to first acquire shares from the public through an open offer and then acquire the additional stakes.
The purpose of fixing the sectoral cap at 26% or 49% is that the Government does not wish to give control in respect of those companies to foreign investor and therefore, modifying the sectoral cap limit to bring it in line with SEBI Takeover Code would defeat the very purpose of fixing the limits.
Similarly, amending the SEBI Takeover Code is also not recommended as the same is framed taking the wider view i.e. considering the India Corporate Sector as well as the practice prevalent in Other Countries and also considering the interest of the shareholders. The Government's suggestion of first giving the Open Offer to acquire the shares from the shareholders and then acquiring the balance stake as available considering the FDI Sectoral Cap either by issue of new shares or from the promoters will serve many purposes:
The purpose of fixing the sectoral cap at 26% or 49% is that the Government does not wish to give control in respect of those companies to foreign investor and therefore, modifying the sectoral cap limit to bring it in line with SEBI Takeover Code would defeat the very purpose of fixing the limits.
Similarly, amending the SEBI Takeover Code is also not recommended as the same is framed taking the wider view i.e. considering the India Corporate Sector as well as the practice prevalent in Other Countries and also considering the interest of the shareholders. The Government's suggestion of first giving the Open Offer to acquire the shares from the shareholders and then acquiring the balance stake as available considering the FDI Sectoral Cap either by issue of new shares or from the promoters will serve many purposes:
- Enable the Indian Companies to raise funds by issuing new shares;
- Enable the promoters to dilute their stake;
- Provide an exit opportunity to the shareholders;
- Ensure the compliance of both SEBI Takeover Code as well as FDI Sectoral Cap
Prepared by: Ms. Ruchi Hans
For any professional query, please contact:
Ms. Divya Vijay
+911140622248
Email:-divya@indiacp.com
