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Stocks of debt ridden companies surge as Sebi relaxes restructuring norms

LiveMint logoLiveMint 22-06-2017 Ravindra N. Sonavane

Mumbai: Shares of debt ridden companies surged on Thursday after Securities and Exchange Board of India (Sebi) relaxed some rules related to their takeover and restructuring in the case of distressed companies.

Debt ridden companies like Amtek Auto Ltd surged 10%, Jaiprakash Associates Ltd 8.4%, GVK Power & Infrastructure Ltd 7.2%, Reliance Defence & Engineering Ltd 6%, Reliance Communication Ltd 2.8%, Castex Technologies Ltd 11%, Metalyst Forgings Ltd 5.4%, JMT Auto Ltd 3%, Electrosteel Steel Ltd 6%, and Bhushan Steel Ltd 2.3%.

The relaxation will make easier for companies to find new buyers and will also allow banks to sell off distressed assets easily, said an analyst on the condition of anonymity.

On Wednesday, Sebi relaxed some rules to hasten the resolution of stressed assets in bank balance sheets. The regulator has exempted buyers of shares in distressed companies from the requirement of making an open offer even if the purchase triggers such an event under the takeover code, Mint reported.

Also read: Sebi eases M&A norms for distressed firms

The exemption will need to be approved by a special resolution (at least 75% shareholders voting in favour). Secondly, the shares bought by the new investor will also be locked in for at least three years.

The regulator said it will grant similar exemptions for those firms which have got their resolution plans approved by the National Company Law Tribunal (NCLT) under the Insolvency and Bankruptcy Code (IBC), Mint report added.

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