Sebi Eases Creeping Acquisition

Norms, Promoters can Hike Stake by

Up to 10%
STAKE HIKE NOT TO TRIGGER AN OPEN OFFER
REGULATOR ALSO CUTS TIME BETWEEN QIPs TO TWO
WEEKS
Our Bureau

Mumbai:

The Securities and Exchange Board of India (Sebi) has allowed promoters to acquire 10%
instead of the currently permissible 5% through creeping acquisitions without triggering
an open offer, giving a one-time relaxation to help locally listed companies access funds
in a difficult environment.

The capital markets regulator has given this exemption under the takeover code to
promoters for this financial year to enable fund infusion into companies that require
liquidity.

Sebi has also reduced the gap between two qualified institutional placements (QIPs) to
two weeks instead of the existing minimum gap of six months.

“This does not allow promoters to do creeping acquisition through the secondary market.
This can only be used if promoters are subscribing in a primary issue where money goes
into the company through a preferential allotment,” said Nitesh Mehta, partner — tax &
regulatory services, BDO India. “Having said this, this relaxation certainly allows
promoters to raise their holding in the company without triggering an open offer.”

Creeping acquisition can be done through both secondary market purchases and primary
issues. Sebi has given a one-time relaxation applicable for acquisitions made during FY21.

“The amendment will enable promoters to provide necessary equity funds to their
company without incurring an obligation of open offer,” said Akila Agrawal, partner &
head - M&A; Cyril Amarchand Mangaldas. “This is especially important as companies are
finding it difficult to access alternative methods of funding such as debt financing, etc., or
access equity funding from third-party investors. It will be interesting to see whether
limited relaxation of only additional 5% will meet the commercial requirements of
companies.”

Sebi’s decision to relax the time period between two QIPs should enable companies to
regularly access investment from institutional investors. Companies prefer raising capital
through QIPs because the process is efficient and relatively quicker than competing
modes of garnering funds.