SEBI further relaxes rules for PSU divestment

The central government’s ability to strategically divest itself of public sector undertakings (PSUs) is subject to regulatory relaxation by the capital markets regulator SEBI, according to a notification.

If the Central Government submits an application regarding its strategic disinvestment in a listed entity, the Board (Sebi) “may, after due consideration of the interest of the investors and the securities market and for the development of the securities market, relax the strict enforcement of any of the requirements of these regulations,” according to a notification made public on Tuesday.

The regulator has revised the LODR (Listing Obligations and Disclosure Requirements) standards.

The Securities and Exchange Board of India (SEBI) made the decision to do away with the requirement for determining the open offer price with regard to the disinvestment of PSUs earlier in September.

According to SEBI regulations, the Volume-Weighted Average Market Price (VWAMP) for the 60 trading days immediately prior to the date of the public announcement is one of the factors that must be considered in determining the open offer price of a commonly traded security.

The Sebi board gave its approval to change the takeover rules in light of strategic PSU divestitures and consideration payable under open offers.

According to SEBI, “Considering the unique nature of the transaction and the lengthy process involved in a PSU disinvestment, such a requirement of determining the open offer price under the takeover regulations frequently acts as an impediment to the successful completion of such strategic disinvestment of PSUs.”

In light of this, SEBI has decided to waive the need of calculating 60 days’ VWAMP for the purpose of determining the open offer price in the event that PSU businesses are divested and a change in ownership, whether through direct or indirect acquisition, results.

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