Newly elected CII president Uday Kotak has said he was not averse to the idea of the takeover of weak businesses by financially strong entities as long as it is in the interest of investors.
Why should an investor be barred from selling his investments, which are currently hammered on account of coronavirus pandemic, Kotak said, adding the decision on taking a call should be left to the investor.
However, he said, the government could take steps to prevent and protect domestic Indian businesses from predatory takeovers from the investors belonging to certain specific nations because of strategic reasons.
“Is this money coming from countries where we have a strategic level issue, then it’s a very separate issue by itself. And even the US wants to protect some key strategic sectors, from some countries for good reason. So, I would say that is a very different reason,” Kotak said.
As far as other takeovers by domestic investors are concerned, he said, “We have to look at the interests of both sides. On the one side is the interest of existing entrenched management, who’s going through a tough time, on the other side, is a very poor performance of the
Citing an example, Kotak said, if an investor is getting Rs 70 on an investment of Rs 100 as against the current value of Rs 30 then he
should be allowed to exit. “We need to look at things from the lens of an investor.”
The outbreak of COVID-19 and sudden fall in demand has hit industries across the world. The crisis has unfolded opportunities for players with deep pockets to buy companies in distress at a very cheap valuation.
About the threat of hostile takeovers, Finance Minister Nirmala Sitharaman had last month said the government was worried and would
ensure that Indian businesses do not get snapped up at throwaway prices.
In April, the government decided to put restrictions on foreign direct investment (FDI) to clamp down on investors from countries like China
looking to buy Indian companies cheaply.