SEBI Modifies Rules for PSU divestment: Notifies Amendment to Substantial Acquisition of Shares and Takeovers Regulations, 2011 [Read Notification]

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The Securities Exchange Board of India (SEBI) has notified the Substantial Acquisition of Shares and Takeovers Regulations, 2011 amending the rules relating to the acquisition of public sector undertakings (PSUs).

On September 30th, a major amendment was issued that govern open offers following a takeover of a company. The amended regulations are in favour of acquirers of PSUs.

The market regulator in its board meeting amended SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, doing away with rules that mandate acquirers of PSUs to calculate open offer price using the last 60 days’ prices.

“The Board, therefore, approved the proposal to dispense with the requirement of calculating 60 days’ VWAMP for determination of open offer price in case of disinvestment of PSU Companies (target company), wherein it results in its change in control, either by way of direct acquisition or indirect acquisition,” Sebi said in a release.

As per the notification issued on Monday, the following changes were notified in regulation 8. “In sub-regulation (2), after clause (d), the following provisos shall be inserted, namely, – “Provided that the price determined as per clause (d) shall not apply in the case of disinvestment of a public sector undertaking by the Central Government or a State Government, as the case may be: Provided further that this proviso shall apply only in case of a change in control in the public sector undertaking,” SEBI said.

“In sub-regulation (3), in clause (e), after the words “frequently traded;” and before the word “and” the following provisos shall be inserted, namely, – “Provided that the price determined as per clause (e) shall not apply in the case of disinvestment of a public sector undertaking by the Central Government or a State Government, as the case may be: Provided further that this proviso shall apply only in case of a change in control in the public sector undertaking,” it added.

SEBI also changed another rule pertaining to the same regulation. The market regulator approved the proposal to permit the acquirer to provide an unconditional and irrevocable bank guarantee for the entire consideration payable under the open offer which will be an alternative to the existing requirement of depositing cash, subject to the approval of RBI.

Relating to the said change, the notification issued on Monday provided that “in sub-regulation (2), after the word “cash” and before the words “of an amount” the words and symbol “or providing unconditional and irrevocable bank guarantee issued in favour of the manager to the open offer by any scheduled commercial bank, subject to the approval of the Reserve Bank of India,” shall be inserted.”

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Notification No: SEBI/LAD-NRO/GN/2022/98

Date of Judgement:   9th November, 2022

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