Market

PSU disinvestment: Sebi proposes relaxing provisions for open offer price determination

The proposal to amend the provisions additionally come in opposition to the backdrop of the federal government planning to promote stakes in additional corporations.

Markets watchdog Sebi has proposed adjustments to the mechanism for figuring out open provide worth with respect to disinvestment of public sector undertakings.

Issuing a session paper on assessment of the willpower of provide worth in case of disinvestment of public sector undertakings (PSUs), the regulator stated the transfer is geared toward enjoyable sure provisions, together with taking out the requirement of bearing in mind 60 days’ volume-weighted common market worth for calculating the provide worth.

Comments from the general public have been sought on the session paper until April 15.

The proposal to amend the provisions additionally come in opposition to the backdrop of the federal government planning to promote stakes in additional corporations.

Noting that strategic disinvestment of PSUs is at variance with privately executed agreements, Sebi within the session paper stated the announcement of personal transactions is made solely upon execution of binding agreements and thus there may be not a lot influence on the traded worth of such goal corporations.

In the case of PSUs’ strategic disinvestment, “Information comes in the public domain at the time of Cabinet approval and subsequent announcements are also made at different stages and thus the market price of the PSU concerned gets highly susceptible to such developments”, it famous.

For such stake gross sales, the acquirer will likely be recognized solely after the shortlisting of bidders, which can be months or years late for the reason that date when the data was first within the public area.

As a end result, “the prospective acquirer shall be chasing a moving open offer price as the market price tends to rise pursuant to announcement of the divestment and various stages thereafter and thus its liability for open offer obligations may constantly increase till the execution of agreement of the PSU with the acquirer,” the session paper issued on Friday stated.

The problem was mentioned by Sebi’s Primary Market Advisory Committee.

Now, the regulator has proposed that “in case of disinvestment of PSU companies, the requirement of 60 days’ volume-weighted average market price-based parameter for calculation of offer price, may be dispensed with”.

In case such PSU corporations have stakes in different corporations and attributable to such disinvestments an oblique acquisition is triggered, the requirement of 60 days’ volume-weighted common market price-based parameter may also be allotted with, as per Sebi.

“The acquirer shall disclose upfront the negotiated price for both direct acquisition as well for indirect acquisition,” it added.



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