Subscribe to enjoy similar stories. The Competition Commission of India’s (CCI) recent easing of a company takeover rule marks a welcome shift in a country where hostile acquisitions have long been viewed with alarm. Under the CCI’s revised rule, companies will no longer need its approval to acquire up to 25% of a target’s shares in the secondary market before making a formal bid.
Shares acquired for this purpose through bonus issues, stock splits, consolidation of face value and group restructuring would not need its prior nod either. The only condition is that the equity transfer should not spell a change in control and that the CCI be notified of such transactions within 30 days. While takeovers must follow a code set by the Securities and Exchange Board of India, by which an open offer must be made to public shareholders if a quarter of another listed firm’s equity is bought, the CCI’s role is to ensure that markets stay well contested.
Upon scrutiny, it can block a merger that stifles competition. The general aversion to hostile takeovers in India can be traced to the high prevalence of family-run businesses. Founding families have keenly kept control of their companies and society tends to see them as rightful owners even if their stakes are low and authority can be wrested.
An early test case was an attempt by London-based businessman Swaraj Paul to take charge of Escorts and DCM from the Nanda and Shriram families back in 1983. It took on the colour of a predatory scandal, with Paul portrayed as an intruder in India Inc, even though he had bought shares after the government allowed non-resident Indian investors to do so. Once New Delhi signalled its sympathy for local industrialists, the actions of Indian
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