India amended takeover rules for companies where the government replaces the board to save them from collapse, paving the way for Satyam Computer Services Ltd.’s state-appointed board to sell a stake to a strategic investor.
The guidelines will apply in cases where the new board has devised a plan that provides for continued operation in the interests of stakeholders, the Securities & Exchange Board of India said Feb. 13, when it announced the decision to ease norms.
The relaxation may make it easier for suitors including Larsen & Toubro Ltd., India’s biggest engineering company, to bid for Hyderabad-based Satyam, the software company at the center of India’s biggest fraud inquiry. The computer-services provider plans to start the search for a strategic investor this week, Chairman Kiran Karnik said yesterday.
The move comes after Satyam’s government-appointed board sought a waiver of the rules, which required buyers to offer to pay the higher of the average share price for the past 26 weeks or two weeks. The regulator would consider easing the takeover norms in “special cases,” Chairman C.B. Bhave said on Feb. 2.
India sacked Satyam’s interim board on Jan. 9, two days after the company’s founder and former chairman Ramalinga Raju said he had falsified accounts and inflated assets by more than $1 billion. Raju is currently in judicial custody and the company’s state-appointed board plans to expedite the sale to help restore investor confidence and stem client defections.
Satyam has lost 75 percent of its market value since Raju’s disclosure on Jan. 7 and was 0.7 percent higher at 44.15 rupees as of 10:11 a.m. in Mumbai trading. The benchmark Sensitive Index gained 1.4 percent.
The regulator also tightened rules for warrant subscriptions, raising the upfront payment for buying warrants to 25 percent from 10 percent. It also eased rules for pricing equity offerings by allowing companies to set the price two days before the opening date of a public offer.
Rules for free share offers were modified, with companies getting 15 days to complete transactions that don’t require shareholder approval. Offers that require approval are to be completed within 60 days. Earlier, companies could take six months to complete a bonus issue.
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The Govt, CLB and Sebi should be lauded for the pro-active role that they have played in helping Satyam come back on track in a record time. A by product of the scam has also been that Sebi has amended few of the take over laws which will make life easier for companies intrested in doing so too.
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