SEBI increases creeping acquisitions limit

By SiliconIndia   |   Wednesday, 29 October 2008, 12:04 Hrs   |    5 Comments
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Mumbai: The Securities and Exchange Board of India has increased the creeping acquisitions limit from 55 percent to 75 percent, creating a new opportunity for investors and promoters. This move could motivate promoters to up their stakes and also be a support to the market price in these turbulent days.

The Finance Minister P. Chidambaram hinted that the regulators would take all necessary steps to uphold strength in the economy and the markets. The market experts term this as one of the unconventional or unorthodox moves to support the markets from sliding down.

This increase comes at a time when many promoters have complained to the regulator to look into the persistent and irrational beating down of their share prices, without any relation to fundamental factors.Promoters could earlier not do creeping acquisition beyond 55 percent. Now, they can buy up to 5 percent every year till the 75 percent limit is hit. The market regulator said creeping acquisition beyond 55 percent will only be through open market normal segment and not bulk deals.

There will be an automatic exemption up to 5 percent increase in shareholding of promoters after the company buy-back. This may prompt certain set of promoters with strong cash reserves to up their stakes in case there is a huge price fall. Moreover, if promoters start buying at lower levels, it could support further shorting and help arrest a share price fall.

"At the moment there just no buyers in the market place. With this move, at least one set of buyers would emerge," says Harish Pathak, a Mumbai based stockbroker.

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