Satyam scam: SEBI to ease buyout rule

The Securities and Exchange Board of India (SEBI) will amend the takeover regulations so as to help arrive at a fair open offer price in special cases, such as the one faced by Satyam Computer Services. SEBI chairman CB Bhave announced this at a press conference after the regulator���s board meeting in Mumbai on Monday. Mr Bhave did not mention a time frame, but said the issue would be addressed at the ���earliest.��� The Satyam board had requested SEBI for relaxation of the open offer pricing norm, as the price prior to January 7, the day on which Satyam founder BV Raju admitted to the accounting fraud, was not relevant in view of the disclosures. ���The board recognised the special circumstances that have arisen in the affairs of the company and concluded that the issue needs to be dealt with in the general context rather than for a specific case. We need to have provisions in our regulations to deal with such cases,��� Mr Bhave said. Under the current rule, an investor holding 15% has to make an open offer for an additional 20% at a price not less than the previous six months��� average. ET had reported on Monday that the SEBI board would meet to discuss special cases such as Satyam. The software service provider���s shares, which were quoting around Rs 330 in mid-December, before the announcement of the abortive investment in Maytas Infrastructure, fell to Rs 180 by the first week of January. It collapsed to Rs 11.50 a couple of days after Mr Raju confessed to the fraud. The six-month average price in this case works out to be in excess of Rs 200, and is deterring potential buyers from making a bid for the company. Among the other decisions taken by the SEBI board, the upfront margin to be paid by allotees of equity warrants, usually the company promoters, has been raised to 25% from the current 10%. During the recent bull run, many promoters had issued warrants to themselves by paying a 10% margin. However, when the warrants came up for conversion into equity, the promoters let it lapse rather than paying the remaining 90%, as the stock price was significantly lower than the price at which they could exercise the option of converting the warrants into shares. ���As far as the 18-month time period and the non-resetting of the (warrant conversion) price is concerned the status quo continues, only the upfront payment will have to be 25%,��� Mr Bhave said. The time frame for announcing the price band for an initial public offering has been reduced to two working days prior to the issue opening for subscription. At present, the price band is disclosed in the prospectus filed with the Registrar of Companies which is about two weeks prior to the issue opening for subscription. ���Given the current volatile market conditions, as well as our drive towards overall reduction in time scale, the board has decided to reduce the time frame,��� Mr Bhave said. Among other things, the SEBI board has also decided that listed companies will have to declare dividend on a per-share basis only. At present, there is no uniformity, as some companies declare dividend on a per-share basis and others as a%age of the shares��� face value. Declaration of dividend as a%age of face value has the potential to mislead the investors, as share face values differ across companies, Mr Bhave said. A 100% dividend pay-out by a company with a 10-rupee face value would amount to Rs 10 per share, while that by a company with a one-rupee face value would amount to Rs 1. SEBI has also reduced the timeline for bonus issue to 15 days, where shareholders��� approval is not required and to 60 days, where shareholders��� approval is required. At present, listed companies are required to complete a bonus issue within a maximum period of 6 months from the date of approval of the issue by the company board.