SEBI wants independent opinion on merger valuation

In a bid to protect the interest of small and marginal shareholders, the Security and Exchange Board of India (SEBI) has asked the listed and unlisted companies to appoint independent merchant bankers during the merger valuation.

Those merchant bankers would disclose a fair and independent opinion regarding the ‘actual’ valuation of the company during the process of merging to SEBI, and the small and marginal investors.

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It is mandatory for all the listed or non-listed companies to reveal the real value of ‘asset’ of the company and on that basis the price of per equity share is determined. But many times, the merging companies do not provide the ‘real data’ to the small and marginal investors and shareholders, thus they can’t claim for their actual rights.

Earlier, the involved bankers in the merging deal used to put the unedited reports before the board of directors/committee before submitting the certificate of the valuation of the merge deal in the stock market, which was many times not met the actual result and at instances influenced by the company, as bankers generally wanted to keep good relationship with company for future business.

However, the stock market regulator in its latest announcement said, “The listed companies as well as the unlisted companies, which are getting merged, shall each be required to appoint an independent merchant banker for giving a fairness opinion on the valuation done by valuers.” Now, Bankers would provide fair opinion regarding the actual valuation of the company under closure 24, as per SEBI statement.

SEBI has also modified the clause 41 of Disclosures and Investor Protection (DIP) guidelines that would reduce the time duration of rights issue to 43 days as against the earlier 109 days.

SEBI, in this regard, said: “In order to bring more efficiency in the disclosures of financial results, certain amendments have been made with regard to timeline for submitting consolidated financial results to the stock exchange, publication thereof, submission and placing of limited review reports before the Board/Committee, etc.”