Market regulator Securities and Exchange Board of India (SEBI) is expected to tighten the norms for takeovers by raising the trigger for a mandatory open offer, and further hiking the size of the open offer from the minimum 20 per cent required at present.
The present takeover trigger for a mandatory open offer to shareholders is a 15 per cent stake buy.
The Takeover Regulations and Advisory Committee headed by C. Achuthan will submit its report to SEBI chairman C.B. Bhave on Monday.
"There is expectation of revision of threshold limit for mandatory open offer from the current 15 per cent level to 25 per cent," said Jagannadham Thunuguntla, equity head at SMC Capital.
If this happens, a company can buy further stake quite close to 25 per cent without initiating the open offer process.
For example, ITC currently holds 14.98 per cent in EIH --- just below the threshold of 15 per cent required to initiate the open offer process. If SEBI raises the threshold to 25 per cent ITC can up its stake to very close to 25 per cent without having to initiate the open offer.
A hike in the open offer size from the minimum 20 per cent"will give exit option to more investors," said a market expert who did not wish to be named.