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Sebi sets creeping acquisition limit at 5%

The Securities and Exchange Board of India has notified the modified takeover code, removing the automatic exemption for preferential allotment by the corporates.

As part of modified takeover regulations, Sebi has decided to set the limit on the creeping acquisition (for a financial year) at 5 per cent of the capital from October 1, 2002.

Earlier, the creeping acquisition limit was kept at 10 per cent for a 12-month period. The new code, notified in the gazette, also has stringent provisions to deal with violation of norms.

The Sebi move to revert to the 5 per cent creeping acquisition limit goes against the recommendation of the Justice P N Bhagwati Committee for reviewing the takeover code. The panel had suggested the retention of the 10 per cent creeping acquisition limit up to March 2004.

One of the main reasons influencing the committee in recommending the retention of the 10 per cent limit is the changes that the domestic industry is expected to go through on account of the various commitments under the agreements of the World Trade Organisation.

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