Regulation 29(A) says that SEBI can relax compliance with any or more provisions of Chapter III of Regulations, 1997, in certain cases, after an application is made by a target company to this effect. {Chapter III deals with substantial acquisition of shares or voting rights in and acquisition of control over a listed company. The extant regulation 29 deals with ‘payment of consideration’}. SEBI may permit the said relaxation if: The Central government or state government or any other regulatory authority has removed the board of directors of the target company and appointed other persons to hold office as directors; such directors have devised a plan which provides for transparent, open and competitive process for continued operation of the target company in the interests of all stakeholders in the target company and such plan does not further the interests of any particular acquirer; the conditions and requirements of the competitive process are reasonable and fair; the process provides for details including the time when the public offer would be made, completed and the manner in which the change in control would be effected; the provisions of Chapter III are likely to act as impediment to implementation of the plan of the target company and relaxation from one or more of such provisions is in public interest and in the interest of investors and the securities market.

Sub-regulation 25(2B) says that no public announcement for a competitive bid shall be made after an acquirer has already made the public announcement pursuant to relaxation granted by the Board in terms of regulation 29A (regulation 25 deals with competitive bid).

So the amended regulations boil down to this: In respect of a target company enjoying a SEBI-granted relaxation under regulation 29(A), no competitive bid will be allowed after an acquirer has already made the public announcement. (It is to be noted that the regulations, before this amendment was carried out, allowed such a competitive bid, subject to certain riders).

Potential acquirers like L&T sought relaxation of SEBI takeover regulations (read, relaxation in computation of offer price) since the offer price computed in accordance with regulation 20(4) of the Regulations, 1997, would have proved to be the overstatement of the year. However, instead of responding to the potential acquirers, SEBI has rightly responded to the target company. (After all, L&T’s request came about primarily because it did not want its investment in Satyam to erode. Neither was it serious about rescuing Satyam nor was it asked by the government to rescue Satyam. L&T was only serious about buying Satyam cheap. SEBI has done well to thwart L&T’s attempt to gain a back-door entry.) So if Satyam agrees to play ball, the potential acquirer can persuade the former to seek relaxation from SEBI in respect of the offer price. Further, the potential acquirer need not fear any competitive bid, courtesy the newly-introduced sub-regulation (2B) under regulation 25.

One can now expect the Satyam board to solicit bids from all the potential acquirers. But how will Satyam know that the bids it has attracted are good enough when it does not know where it stands financially? The restatement of its accounts will take another five months at least and will come in handy while assessing bids. According to Satyam chairman Kiran Karnik, “Considering the nature and the extent of the fraud, it will take quite some time ...; the bidders will have to go by their judgment of the company and its intrinsic value and they all know what the position of the company is”.

In the absence of at least reasonably accurate financials, how can Satyam directors ensure that the conditions and requirements of the competitive process are reasonable and fair? Or for that matter, devise a plan which does not further the interests of any particular acquirer? How can Satyam directors satisfy SEBI in terms of provisions of regulation 29(A), in other words? Definitely Satyam can run under its own steam for another six months whence its restated financials will be out. Given the kind of people at the helm of affairs at Satyam now and the government of India’s determination not to allow the Satyam saga to vitiate the investment climate in the country, a better deal for all the stakeholders of Satyam can be ensured.

If for whatever reason, the six-month wait is unbearable, a complete sell-out is advisable and that should involve a carrot – a controlling stake of 51 percent through issue of new shares in the company to the highest bidder in an open bidding exercise. That way Satyam can access the much-needed working capital and keep all its stakeholders happy too!

Hopefully, Karnik does not want to send the potential acquirers on a wild goose chase.