SEBI is not comfortable with certain provisions of the proposed offer from Diageo, including those related to preferential allotment of shares, and it fears that minority shareholders of United Spirits might be at a disadvantageous position under the existing terms of the deal
New Delhi: Market regulator Securities and Exchange Board of India (SEBI) has sought fresh clarifications from global liquor giant Diageo regarding its Rs5,441 crore open offer for stake purchase in UB group's United Spirits Ltd -- a development that could further delay the closure of this deal, reports PTI.
This is the second time in about a month that SEBI has sought clarifications from Diageo through the liquor major's merchant bankers, JM Financial, with regard to the proposed deal.
Sources said the regulator is not comfortable with certain provisions of the proposed offer, including those related to preferential allotment of shares, and it fears that the minority shareholders might be at disadvantageous position under the existing terms of the deal.
The bankers had submitted their reply to SEBI after the latter sought clarifications from them in December, but the regulator has now sought fresh clarifications from them.
As per SEBI's latest weekly status update of pending open offers as on 11th January, the "reply (is) awaited" from merchant bankers for United Spirits open offer.
UK-based Diageo had announced a deal more than two months ago on 9th November under which it agreed to acquire up to 53.4% stake in United Spirits for an aggregate amount of Rs11,166.6 crore.
As part of the deal, Diageo would acquire 27.4% stake for Rs5,725.4 crore through a combination of share purchase from existing promoters and preferential allotment of shares. In addition, it had offered to acquire an additional 26% stake for Rs5,441.07 crore through an open offer for public shareholders.
Any acquisition of 25% or more stake in a listed company triggers a mandatory open offer for purchase of additional 26% stake from the public shareholders and the same needs to be cleared by the market regulator.
The proposed open offer for an additional 26% stake in USL entails purchase of about 3.8 crore shares at a price of Rs1,440 per share, totalling to Rs5,441 crore, by Relay BV, a wholly-owned subsidiary of Diageo.
The open offer was earlier scheduled to start on 7th January but it was postponed in absence of necessary regulatory approvals.
SEBI had received the draft letter of this open offer on 29th November.
An acquirer can go ahead with the open offer only after SEBI issues its "observations" on the same.
USL, the country's largest spirits company, is part of Vijay Mallya-led UB Group, whose aviation venture Kingfisher Airlines has been going through turbulent times for many months now and its licence is currently suspended.
SEBI slapped a fine of Rs25 lakh on Rich Universe Network and another Rs15 lakh on the company's CMD Shashwat Agarwal for not furnishing information related to alleged irregularity in the shares of the company
Mumbai: the Securities and Exchange Board of India (SEBI) imposed a penalty of Rs40 lakh on Rich Universe Network and its chairman and managing director for not furnishing information sought by the market regulator related to alleged irregularity in the shares of the company, reports PTI.
SEBI slapped a fine of Rs25 lakh on Rich Universe Network and another Rs15 lakh on the company’s chairman and managing director (CMD)—Shashwat Agarwal.
“I impose a penalty of Rs25 lakh upon Rich Universe Network and a penalty of Rs15 lakh upon Shashwat Agarwal and thus a total penalty of Rs40 lakh, under the provisions ...” SEBI's Adjudicating Officer PK Kuriachen said in the order.
However, SEBI disposed the case against the company's directors—Rajeev Agarwal, Sanjay Gupta and Dhrupesh Shah—as the allegations against them could not be established.
It also said the proceedings against another company director, KK Agarwal, ‘abated’ as he had expired.
SEBI had conducted a probe into the alleged irregularity in the share trading of Rich Universe Network (earlier known as Rich Capital & Financial Services) from 1st February to 24 September 2010.
It was revealed that the company’s shares opened at Rs56.75 on 1 February 2010, reached a high of Rs119.90 on 2 September 2010 and closed at Rs111.80 on 24 September 2010.
As per SEBI, a group of entities had indulged in circular trading, created artificial volume and influenced the price of firm's shares.
In order to further analyse the violations committed by the several entities, SEBI’s Investigating Authority (IA) had issued a summons to the company and its CMD requiring them to provide certain information documents, which they failed to furnish and thereby hampered the probe.
SEBI said the summons were not independently issued to the company’s directors but were referred to the company and its CMD.
It observed that the available records did not show the directors of being charge of company’s day-to-day affairs and were having knowledge or participated in any of such issues being done by the company or its managing director.
SEBI said the directors “cannot be made responsible for the failure on the part of company in not furnishing the information/documents etc, and only company and Shashwat Agarwal (being CMD) can be made responsible for such failure”.
Bankers have asked the central bank for a cut in both repo and CRR in the upcoming policy review
Mumbai: Leading bankers met top brass of the Reserve Bank of India (RBI), impressing upon them the need to shift focus of monetary policy to growth and sought reduction in the repo rate and the cash reserve ratio (CRR) by 0.5%, reports PTI.
“While inflation concerns remain, growth is a bigger concern... so, while we understand the issues related to inflation at this point of time, it was our recommendation that there should be a rate cut so that growth comes first,” HDFC Bank's MD Aditya Puri told reporters.
Speaking after the customary pre-policy meeting with RBI brass, he said that bankers have asked for a cut in both repo (rate at which the RBI lends to banks) and CRR—the portion of deposits banks have to mandatorily park with the central bank—in the upcoming policy review.
CRR stands at 4.25%. Repo rate is at 8%.
“The bankers have urged the RBI to reduce interest rates by 50 basis points at least. Even the CRR should come down by 25-50 basis points,” Indian Banks Association (IBA) chief executive K Ramakrishnan said.
One basis point is equal to 0.01%.
The body’s chairman and CMD of Punjab National Bank, KR Kamath said the banks would reduce interest rates if RBI cuts policy rates in the coming policy.
“If the rate of interest is reduced, probably the transmission will happen. Bankers have already been saying that transmission will happen if there is a rate cut,” Kamath said.
He also said reduction in rates would help in increase in investment, which would boost credit growth.
Ramakrishnan said if both these rates are lowered, it will send a positive signal to market.
“If both these things (repo and a CRR cut) happen, transmission will happen and it will be a good sign to the market that growth is going to happen in a big way,” he said.
The likelihood of a rate cut became strong with manufacturing growth remaining in the negative terrain and WPI-based headline inflation hitting a three-year low at 7.18% in December.
Moreover, RBI governor D Subbarao had in the October policy as well as at the subsequent mid-quarter review had hinted at a rate cut in the January policy.
On the poor deposit growth, the IBA chief executive said bankers raised concerns regarding sluggish deposit growth along with low credit uptake. “Sluggish deposit growth is a matter of concern to the bankers. Credit is also not picking up the way it should and hovering around 8% now.”
According to Ramakrishnan, both bankers and the central bank are concerned about rising bad assets in the system.
About the recent suggestion to pay interest on current account, Ramakrishnan said there was a passing mention regarding this with the apex bank at the meeting.