The elephant delivers: the way forward

The sensex is trading at 18000 levels, and we can best say that the sensex is currently consolidating. There are thousands of investors, not very sure whether the markets are heading upwards or a correction is due. Any bad news from the USA or Europe might cause a major correction. I see this as an opportunity. Why? Simply because the domestic growth story is very robust.

Today the elephant(SBI) announced its FY11 Q1 results, which beat the expectations on the street. The bank posted a jump of over 25% in net profit's over the previous(year) quarter. Net Interest Income(NII, which is Interest earned minus Interest expended) grew a robust 45.36% to 7304 crore. Net NPA stood at 1.7% as compared to 1.55% for the previous quarter(this is a concern but quiet acceptable since the bank has witnessed tremendous credit growth). These numbers( specially the NII) clearly indicate that corporate India is on a clear growth path, because SBI has the maximum penetration into the economy when compared to the other banks. Healthy credit growth is a testimony to the fact that the economy is growing.

More thoughts on the sweeping open offer norm

Until now to make an open offer, the acquirer had to have 15% stake in the target company. This threshold has been increased to 25%(which bestows the acquirer with the power to pass resolutions within the board). This makes sense because a company, wanting to build up a strategic position in the target company, would go to the open market.

Moreover, the time period for making the open offer has been considerable reduced to 57 days. This will help in expediting the whole process.

Is India ready for a 100% open offer norm?

Today, SEBI has laid down new guidelines tweeking the way open offers are made in India by an acquirer. Until today an acquirer, who already owned 15% of a company, could increase the stake by making a 20% open offer to the general public. This didn't provide 100% exit option to the general public. To provide the retail shareholder an equitable opportunity to exit the company, the SEBI panel is planning to make it mandatory for the acquirer to make an 100% open offer to the general public.