It proposes scrapping the norm on the 60-day weighted average market price to set the asking price
It proposes scrapping the norm on the 60-day weighted average market price to set the asking price
Market watchdog SEBI has proposed changes to the mechanism for determining the open offer price in relation to divestments from public sector companies.
In releasing a consultation paper reviewing the determination of the offer price in the event of public sector entities (PSUs) divestments, the regulator said the move aims to relax certain provisions, including removing the 60-day volume requirement Consider -weighted average market price to calculate bid price.
The public was invited to comment on the consultation paper by April 15.
The proposal to amend the regulations also comes as the government plans to sell stakes in more companies.
Noting that the strategic divestment of PSUs is at odds with privately entered into agreements, SEBI said that the announcement of private transactions is made only after binding agreements have been entered into and therefore there is no major impact on the trading price of such target companies.
In the case of the strategic divestment of PSUs, “information comes out at the time of Cabinet approval, and subsequent announcements are also made at different stages, and therefore the market price of the PSUs in question becomes very vulnerable to such developments,” she noted.
In such equity sales, the acquirer is not identified until after the shortlist of bidders, which may be months or years late since the information first became public.
As a result, the prospective acquirer “chases a moving open offer price as the market price tends to increase following the divestment announcement and various stages thereafter and thus its liability for open offer obligations may steadily increase up to the closing of the agreement of the PSU with the acquirer,” said the regulatory authority in the consultation paper.
Now, the regulator has proposed that “in the event of a divestment of PSU companies, the requirement for a 60-day volume-weighted average market price-based parameter to calculate the offer price can be waived.”
In the event that such PSU companies hold equity interests in other companies and an indirect acquisition is triggered by such divestments, the requirement of a volume-weighted average market price-based parameter of 60 days can also be waived according to SEBI.
“The acquirer must disclose the negotiated price in advance for both direct acquisition and indirect acquisition,” he added.
