Mumbai, Oct 27: The sudden and inexplicable move by the Securities and Exchange Board of India (SEBI) to raise the creeping acquisition limit from 2 per cent to five per cent threshold limit for making open offer from 10 per cent to 15 per cent has raised several eyebrows. On the face of it, these changes in the takeover code appear innocuous and aimed at reversing sagging fortunes of the corporate sector. However, on closer examination, the Unit Trust of India (UTI) - which is resisting moves to come under the SEBI control - seems to be the beneficiary of the market regulator's decision.``There was no pressing demand for the SEBI to change the takeover code at this juncture. It seems the UTI will benefit from this move more than the corporates,'' said a corporate source. Although some industry associations and corporates were making occasional pleas about hiking the creeping acquisition limit, nobody had made any serious demand to increase this limit recently. (As per the takeover code, promoters canhike the stake in the company through the creeping acquisition route. Now they can buy upto five per cent of the equity capital every year without attracting the open offer clause).With the SEBI changing rules, the UTI - which was facing a major outflow of funds under the US-64 scheme - will now be able to ask promoters to buy back the shares held by the trust. UTI, with investible funds of nearly Rs 60,000 crore, is one of the largest stakeholders in hundreds of companies. It cannot unload the shares directly in the market as any such move will depress the share prices further besides adding to the bearish sentiment.UTI can now force promoters to buy back upto five per cent of the stake held by the former without attracting the open offer clause. For the UTI which faced redemptions of nearly Rs 650 crore in the first six days after the US-64 problem broke out, this is a convenient route to raise funds without upsetting the market equilibrium. Especially so when even companies have started queuing upfor redeeming US-64 units.Curiously, when the takeover committee headed by Justice P N Bhagwati submitted its report last year, it had mooted five per cent limit for creeping acquisition. Strangely, for reasons known to SEBI only, the board of the regulator said two per cent limit was sufficient and put this limit last year. ``SEBI did not consider our suggestion for five per cent limit at that time,'' said a member of the takeover panel.However, SEBI suddenly raised the limit to five per cent last week even surprising the takeover panel. It may be noted that the takeover committee - which was reconstituted by the SEBI a couple of months ago to plug the loopholes in the present code - is yet to submit its second report. ``We still stand by our earlier decision of five per cent limit for creeping acquisition. We had conveyed this to SEBI,'' the member of the takeover panel said.Corporate watchers were also surprised by the SEBI's move to hike creeping acquisition limit and threshold limit for makingopen offer without a formal board meeting. When SEBI cleared the code last year, it discussed even minute details in several board meetings. The stock exchanges still have 10 per cent trigger for making open offer. As per the listing norms, any person who acquires 10 per cent stake of a company needs to inform the stock exchange and make a public offer.``Clearly these decisions were not taken with the interest of investors in mind. It may be aimed at benefiting UTI or somebody else,'' said a market source. One reason for the SEBI to restrict the limit to two per cent last year was to minimise manipulation by promoters in share prices. Now promoters have more leeway in buying and selling shares of their own companies. For promoters who are armed with price-sensitive information about the company, the move is tantamount to opening a Pandora's box of insider trading.
