The Tribune, Chandigarh, India

M&A deals to cost more
SEBI proposes changes in takeover norms

Recommendations

Raise open offer trigger to 25 pc

Increase open offer size to 100 pc

Base offer price on average of 12 weeks

Automatically delist the target company if acquirer's holding exceeds 90 pc

Acquirer to make public announcement within 5 days of agreement

Acquirer can raise the offer price 3 days prior to open offer

Mumbai, July 19
An entity buying 25 per cent stake in a company will need to make an open offer to the rest of the shareholders, as per the sweeping changes proposed by a SEBI panel in the takeover guidelines.

Under the existing norms, the trigger point for making an open offer to shareholders was acquisition of 15 per cent equity in the target company through market operations or through a negotiated deal.

If the report of the SEBI takeover panel is accepted by SEBI, the open offer would be available to all shareholders.

The new norm of making an open offer for 100 per cent stake would give all shareholders an opportunity to exit the company and get fair price for their equity stake.

At present, the norm for making open offer is 20 per cent of the share capital.

The panel also recommended that the offer price would be based on the volume weighted average of 12 weeks market price of the target company, against 26 weeks now.

The panel recommended that for frequently traded shares, 60-day trading volume weighted average market price would be taken into account for calculating the minimum offer price.

Commenting on the move to raise the open offer trigger to 25 per cent, Diljeet Titus, senior partner of law firm Titus and Co, said, "It is desirable as the new prompter will be required to make open offer when he is close to acquiring substantial stake in the company. One needs at least 26 per cent equity to have a say in passing of special resolution." Experts said the recommendation, if put in place, would make acquisitions expensive in widely held companies as it has to make offer for all the shareholders.

"The minority shareholders will get an opportunity to exit, but acquisition costs can go up by three-fold and acquirers would have to reconsider their financing arrangements," BMR Advisors partner Rohit Berry said.

SEBI chairman CB Bhave said the panel was set up in September 2009 with the aim to provide guidelines that will shape acquisitions in India for the next 5-10 years.

The panel also recommended that the formalities for competition of an open offer be reduced to 57 days from the current 95 days.

The panel said in case the acquirer's holding exceeds 90 per cent in the target company, delisting should be triggered automatically.

With this, acquirers can use open offer as a tool to delist the target company. Further, the panel has mandated that the acquirer at the time of coming out with the acquisition announcement will have to state his intention about the delisting.

It has also recommended that the market regulator could grant exemptions to a firm from coming out with an open offer in case of corporate debt restructuring, rights issue among others.

Further, the acquirer could raise the offer price three days prior to the beginning of the open offer. SEBI has sought public comments on the panel report by August 31. — PTI

FM sticks to 8.5% growth forecast

New Delhi, July 19
Finance Minister Pranab Mukherjee today said he will not be swayed by the IMF's higher growth projection of 9.5 per cent but will stick to his conservative outlook of about 8.5 per cent plus economic expansion for the current fiscal.

"Always, we have dispute with the IMF. I was inclined to accept the IMF assessment for India's growth for the year when they projected it 9.4-9.5 per cent. But I am being conservative in my assessment...I will be happy with 8.5 per cent plus growth," Mukherjee told a conference on financial inclusion hosted by industry body CII here.

Earlier this month, the IMF had hiked the country's growth forecast for 2010 to 9.5 per cent from its April projection of 8.8 per cent. He further said the Eurozone crisis is not going to affect us if it gets confined to Greece and a couple of other countries, adding that our economy has shown considerable resilience. Mukherjee said globally he has heard appreciation for the country's banking structure and that is why he did not agree that there should be some sort of taxes on the banks to discipline them.

Highlighting the importance of financial inclusion, he said, "it is my firm belief that inclusive economic growth is crucial for achieving sustainable economic development. Therefore, financial inclusion is an important goal for the government." He further said it should be recognised that if growth is to be sustained in the medium- to long-term, it has to necessarily involve the common man as important stakeholders. — PTI

Foodgrain output for 2009-10 revised to 218.2 million tonnes
Vibha Sharma
Tribune News Service

New Delhi, July 19
The total foodgrain production in 2009-10 is likely to be 218.20 million tonnes, slightly up from 218.19 million tonnes, projected by the third advance estimates issued in May, but lower than the 2008-09 final estimates of 234.47 million tonnes, as per the fourth and final estimates released by the Agriculture Ministry today.

In all, the foodgrain output for 2009-10 will be 6.9 per cent below 234.47 million tonnes recorded in 2008-09.

However, upward revision in the foodgrain output from the third estimate has given rise to speculations that the government can impose duty to discourage cheap wheat imports following a good crop. An Empowered Group of Ministers (EGoM) will this week contemplate the Agriculture Ministry’s proposal and decide whether or not to impose a tax of 40 per cent on wheat imports.

Wheat production has reached record 80.71 million tonnes, higher than the earlier best of 80.68 million tonnes achieved in 2008-09 but still lower than 80.98 million tonnes estimated in May.

Meanwhile, pulses production has reached record 14.59 million tonnes.

Pulses have been revised downward to 14.59 million tonnes from 14.77 million tonnes in the third estimate. While pulses seem to be heading for a six-year record production, output of oil seeds is plummeting. From 27.72 million tonnes in 2008-09, the latest estimate predicts production of oil seeds at 24.93 million tonnes in 2009-10.

The EGoM headed by Finance Minister Pranab Mukherjee is also likely to allow export of some varieties of non-basmati rice, even though estimates of rabi foodgrain output have been scaled down in the fourth estimate from 89.31 million tonnes in third estimate to 80.13 million tonnes in the final estimate.

Rice output has been revised downward at 89.13 million tonnes in the fourth estimate for 2009-10 from 89.31 million tonnes in the third estimate.

June exports zoom 30 pc

New Delhi, July 19
Exports remained robust with a 30.4 per cent annual growth in June at $17.75 billion, but were short of the impressive May performance, amidst apprehensions of the European debt trouble casting shadow on global trade.

In June 2009, exports had shrunk by about 28 per cent under the impact of the global financial meltdown.

"There is a problem in Europe...mood is not good out there in Europe," Commerce Secretary Rahul Khullar told newsmen here while releasing the June trade figures.

Though on a low base for comparison, in May exports had posted an impressive 35.1 per cent growth at $16.1 billion. Imports for the month increased 23 per cent to $28.3 billion, Khullar said, widening the country's trade deficit to $10.55 billion.

In the first quarter ended June, exports stood at $50.8 billion showing a growth of 32.2 per cent over the year-ago period. Against this, imports grew by 34 per cent to $83 billion, leaving the country with a trade deficit of $32.2 billion.

The sectors which registered healthy growth in June include engineering (90 per cent), petroleum and oil products (66 per cent), gems and jewellery (24 per cent) and chemicals (41 per cent). However, exports of readymade garments contracted by 14 per cent in the month.

Federation of Indian Export Organisations (FIEO) president A Sakthivel said the focus given by the commerce ministry both for diversification of products as well as market has started yielding results. — PTI

Bank of Baroda to expand branch network
Ruchika M. Khanna
Tribune News Service

Chandigarh, July 19
Hoping to add business worth Rs 2,500 crore from this region, the Bank of Baroda is all set to expand its branch network in Punjab, Haryana, Himachal, and J&K. The bank added seven new branches today, and will be opening 14 branches by the end of this fiscal.

The focus of the bank will continue to be in the semi-urban and rural areas. Majority of the new branches are being opened in rural areas, which have a population less than 50,000. “These are unbanked areas, where we can generate good business. But more importantly, the decision to open branches in the semi-urban and rural areas is aimed at achieving financial inclusion. We are also working with the State Level Bankers Committee and are committed for 100 per cent financial inclusion of 11 villages in Punjab and six villages in Haryana,” said SK Goyal, DGM, (Punjab, Haryana, Himachal, J&K), Bank of Baroda.

He said all new branches will be on core banking, and will provide online facilities. These branches will also take care of mutual funds and life insurance requirements of its customers, through its subsidiaries.

With the opening of new branches at Ropar, Muktsar and Dhuri (Punjab), Saha, Karnal and Pinjore (Haryana) and Kullu (Himachal), the total number of branches in this region has touched 109. “This region is generating business worth Rs 8,500 crore (as on March 31, 2010) for the bank. By the end of this fiscal, we are targeting business worth Rs 11,000 crore from these states,” he said.

Though the maximum exposure of the bank in this region has been in the retail sector (home, education and auto loans amounting to Rs 1,400 crore), the bank has a good exposure in the SME sector (Rs 700 crore) and in the agriculture loan sector (Rs 400 crore). “In order to increase our business, we will be targeting these three sectors, besides the small borrowers. Some new schemes are also being worked out to woo customers from these sectors,” he said.

‘Lending rates to go up after Sept’

New Delhi, July 19
ICICI Bank today said it expects lending rates to go up after September as credit offtake is likely to pick up in the second half of the current fiscal. "My belief is the demand for liquidity will increase substantially in the second half of this year," ICICI Bank CEO Chanda Kochhar said on the sidelines of a CII function.

"So, you would see some gradual increase in interest rate on the lending side over the next one year," she said.

Asked about the IPO plans of the bank's subsidiary ICICI Securities, she said, "There is nothing in the offfing. Nothing in this fiscal." ICICI Securities is ICICI Bank's broking and advisory unit which has pioneered an online share trading platform in India.

On base rate, Kochhar said it has already been announced and lending rates are getting realligned with base rate.

"Immediately you will not see change in effective rate just because of the announcement of base rate," she said.

On inflation, she said it is something that the economy needs to monitor as it is becoming widespread and is not just food related but has spread to other sectors as well.

"My feeling is as (production) capacity gets created in the country and supply improves that is the best way of correcting inflation. So, over a period one would see a very gradual correction of inflation taking place," she said.

Asked about her expectation from the RBI’s policy review, scheduled for July 27, she said there is a need to balance between checking inflation and ensuring that growth goes back to the old level of 9 per cent. — PTI

HDFC Bank’s net up 34 pc

Mumbai, July 19
Private sector lender HDFC Bank today reported a 33.8 per cent increase in its June quarter net profit at Rs 811.71 crore. The bank had reported a Rs 606-crore profit in the corresponding quarter last fiscal.

Total income rose by 4.3 per cent to Rs 5,360 crore in the April-June quarter up from Rs 5,136 crore in the same period last year, HDFC Bank said in a filing to the BSE.

Gross non-performing assets declined to 1.21 per cent from 2.05 per cent during the quarter, while the net interest margin rose marginally to 4.3 per cent from 4.2 per cent a year earlier.

The bank's provisions were down at Rs 555 crore from over Rs 658 crore in the same quarter last fiscal.

Shares of the bank rose 0.57 per cent to Rs 2,050.35 on the BSE, on a day when the broader Sensex closed down 27 points at 17,928.42. — PTI