Posts Tagged ‘SEBI chairman’

SEBI Chief Bhave Displeased with Overpricing of IPOs

CB Bhave, the Chairman of Securities and Exchange Board of India (SEBI), has voiced his concern over the unrealistic pricing of initial public offers (IPOs) by investment bankers. The chairman stated  that the bankers should not overlook the interests of investors at large just to maximize returns for promoters, as it is they who feel the brunt when the steeply priced shares of companies decline when market tide overturns. Bhave stated “in a bid to maximise returns for promoters, they (investment bankers) are not looking at the interests of investors…. You need to introspect whether it is a healthy practice. If you keep investors disappointed day in and day out, the cause of investors will only be a lip service.”

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Bhave’s displeasure on the IPOs by companies at prices disproportionate to their revenues, profits and net worth came after a recent report by one of the leading rating agency showed that out of the 116 IPOs that surfaced between August 2007 and August 2010 as high as 62% of the IPOs are trading lower than their respective price bands. In addition, the BSE IPO index which gained 14.5% in the last 12 months underperformed against the Sensex which increased by 19.45%.

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The investment banker’s ploy of quoting near-zero fees to garner divestment issuances too has not gone down well with the SEBI Chairman who expressed reservations over the prcatice as he stated “they need to decide as to whether they can go on charging zero fees for doing work. What mechanism they evolve is for them to decide.”  He also is of the belief that a code of conduct or ethics should be put into practice to avoid such competition. ‘The industry body can do this by bringing in a certain degree of quality and behaviour,’ said Bhave.

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Bharti-MTN Deal May Hit Turbulent Weather with New Takeover Norms in Place!!

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The $23-billion equity swap deal proposed by Bharti Airtel and South Africa’s MTN may hit turbulent weather with India’s capital markets watchdog amending the merger and takeover norms involving international transactions, experts said Tuesday.

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In a move that surprised the corporate sector, the Securities and Exchange Board of India (SEBI) Tuesday said the mandatory open offer norm will be triggered even if the overseas equity holdings, in the form of global depository receipts or American depository shares, exceed 15 percent of the total paid-up capital of the target company.

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Earlier, the open offer was mandatory only when the acquisition of shares in the target company exceeded 15 percent during transactions entered into within the country, either through stock market operations or through preferential deals.

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In the Bharti-MTN deal, the two sides proposed to exchange shares in addition to payout of cash that exceeds 15 percent.

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Bharti had proposed to buy 36 percent of the South African company by offering shareholders half a Bharti share, whereas MTN was to get a 25 percent stake in the Indian telecom major for $2.9 billion by issuing global depository receipts.

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“In its existing form, the Bharti-MTN deal will become more complicated because of this amendment. The dynamics have changed and both MTN and Bharti will have to go back to the drawing board to see the deal through,” said SMC Capitals equity head Jagannadham Thunuguntla.

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As per the existing provisions of the SEBI takeover code, no acquirer can buy shares of 15 percent or more in a listed company without making an open offer to acquire a minimum of 20 percent of such listed company’s shares from the public shareholders.

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Announcing the changes in the takeover code, SEBI chairman C.B. Bhave also said that there would be no retrospective effect on earlier deals because of this amendment.

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