MUMBAI, Nov 7: This is the tenth in our series styled "Business Speaks" where Williamson Magor director Aditya Khaitan hopes for protection measures against hostile takeovers.

I see no problem in the Asian Paints deal. As one of the promoters Atul Choksey had the right to stay on or go out of the company. Depending on the merits and demerits it was perfectly all right whether he sold it to a foreign institutional investor or a company.

Incidentally the offer was made to the co-promoters who had refused to buy out his portion, hence later deals struck should not raise eyebrows. I feel that as one of the promoters, he had the full right to encash his assets.

Moreover, why should the company be worried about a 9 per cent stake - it essentially means very small an amount as far as the entire promoter holding is concerned.

I feel that there should be no cap on foreign equity. Why should we maintain double standards? On one hand, we are allowing private equity in infrastructure companies, so why a special cap in some areas? Yes, there should be some measure for protection to prevent hostile takeovers - the government should not open the floodgates one fine day. They should fix up a timeframe for Indian companies to gear up activities and ensure safety from such events if possible.

With liberalisation one should welcome the takeover regime. But the companies must be given some breathing time to step up measures to strengthen themselves. Moreover the companies should adopt a defence process to protect themselves too. I believe that it is the shareholders' value which assumes prime significance. There are two ways to counter a sudden takeover. First, the promoters should have a reasonable holding of over 30 per cent. As part of our strategy, for example, we have decided as a policy measure never to dilute our stake below 40 per cent. Secondly, if the promoters are able to satisfy the shareholders' value in terms of ensuring dividends, capital appreciation and running the company in a professional manner, why should the shareholder sell his shares?

Moreover, if one can run a company professionally, the question of being protected from a takeover does not arise. It is then best for the shareholder to decide whether to try a better option. There is sometimes a problem in expanding capacities without increasing of equity. But here again, the fear of takeover should not arise as the company, if committed to its purpose, should issue fresh equity at a premium which may not make it very viable for a takeover.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.