Mumbai, Mar 13: IDBI chairman SH Khan has categorically ruled out any funding of hostile takeover attempts. Defining a hostile takeover as one where a rival contender mounts a raid without the consent of the promoting companies, Khan said that "IDBI will not fund such moves"."There is no law at present which really restricts us from funding a takeover bid and the course of action will vary from institution to institution," he said, adding that the institution has funded takeovers in the past. Khan also said that the issue of funding a particular takeover bid and divestment in favour of a bidder should be seen separately. IDBI has exposure in terms of equity and debt in around 3,000 domestic large- and medium-sized companies. Khan added that in order to protect their exposures, IDBI can stall a hostile takeover move by refusing permission which is mandatory for the assisted companies before making an open offer.
"Any acquirer company in which IDBI has a stake by way of debt must take our prior approvalfor making investments in terms of an open offer. We have to evaluate the offer from various angles, including its impact on the financial position of the acquirer company. The real test for allowing the investment will be whether it enhances the shareholders' value and does it adversely affect our interest as lenders. If we think the company does not meet the above criteria, we can refuse permission," he said.
Khan said that irrespective of the institution's equity or debt exposure, the companies involved have to take approvals from the IDBI before making any hostile/friendly open offers. "In the first group of companies, IDBI has to take a decision whether to sell our stake or not, while in the second group of companies, where we have to protect our loans... if we think the loans are protected we can ask them to go ahead with the offer, provided they can arrange for funds from other sources.
"We have to make an in-depth analysis of all the offers as we cannot take a decision in haste. We have to lookat the shareholders' interests of all the companies involved," Khan said.
Besides, the track record and the quality of the management of the two companies would be taken into consideration while taking a final decision on the disinvestment, the chairman said. Declining to comment on both Indal and Raasi takeover cases, Khan said two separate committees have been formed to evaluate the offers made by the acquirer companies, that is, Sterlite/Alcan and India Cements.
Khan mentioned that the evaluation made by the committee would be discussed at the heads of the institutions and a joint approach evolved.
Khan further made it clear that the evaluation made by the committee would not be binding on any financial institution as each has to protect its own interests.
There is no standing institutional committee to examine each takeover.Such committees could be constituted to examine each case, if considered necessary.
Replying to the question whether there is a change in institutional approach to takeovers,Khan said that ``with the Takeover Code by the Sebi quite transparent and all the legal implications clearly defined, the institution is not averse to taking a positive view of takeover bids provided it enhances the shareholder value."
