Sebi gives greater say for public shareholders in mergers

The Securities and Exchange Board of India (Sebi) has tightened the norms for merger of an unlisted company with a listed entity, as part of its attempts to safeguard the interests of the public shareholders.

The board of the capital market regulator, at its meeting at Jaipur, decided that the holding of public shareholders post the merger cannot be less than 25 per cent. Further, Sebi has stipulated a similar threshold for institutional shareholders of the unlisted entity as well post merger.

''The objective is to have wider public shareholding and to prevent very large unlisted company to get listed by merging with a very small company,'' Sebi stated in a release.

The regulator has made it clear that an unlisted company can be merged with a listed company only if the latter is listed on a stock exchange having nationwide trading terminals.

Sebi has also made e-voting mandatory in cases wherein the stake of such shareholders reduces by more than 5 per cent in the merged entity.

Besides, in order to reduce the overall cost of transaction, the regulator reduced broker fees by 25 per cent from Rs20 to Rs15 per Rs1 crore of turnover. This will benefit investors and promote development of the securities market, according to the Sebi the statement.

''Keeping this objective in mind and taking into consideration the projected income and expenditure of Sebi for the next three financial years, the board decided to reduce the fees payable by brokers by 25% from Rs 20 per crore of turnover to Rs 15 per crore,'' a release said.

In a separate development, Sebi also decided that mutual funds shold include in their advertisements the performance of the scheme in terms of CAGR for the past one year, three years and five years and since inception, in order to help mutual fund investors take better informed decisions.
Currently, fund houses only publish the scheme's return for as many as twelve months as possible for the past three years.

The regulator has also allowed mutual funds to invest in hybrid instruments like REITs and InvITs but has laid down certain criteria on the cap for such investments.

A mutual fund scheme cannot invest more than five per cent of its net asset value (NAV) in units of a single REITs/InvITs issuer. Further, the overall exposure of a scheme in REITs/InvITs has been capped at 10 per cent.

However, such limits will not be applicable for investments in case of index fund or sector or industry specific scheme pertaining to REITs and InvITs.