Ag/tkover/sebiltr
December 30, 2011
Shri U.K.Sinha,
The Chairman
SEBI
SEBI Bhavan, 3rd Floor, B Wing,
Plot No. C-4A, G Block
Bandra Kurla Complex
Mumbai: 400051
Re. Loss of Interest to investors on thousands of crores
Further to my email of yesterday, I wish to bring to your notice once again the loss to investors on thousands of crores investment and undue enrichment of issuers at the cost of Investors.
“ First Come First Serve” has been associated with short changing the investors right from the MORGAN STANLEY IPO. It still continues to do so no matter who is the issuer—even Govt. Bodies.
Without ensuring proper mechanism in place, Issues like NHAI & PFC have been cleared on “ First Come First Serve” . More over interest on that portion of application money on which no allotment has been made is only 4% as against 8.3%.
It is in the issuer’s interest to suppress the information of oversubscription and keep the offer open for a much longer period then required, if for nothing else to earn the interest arbitrage. Some basic questions that arise are:
1. How the issuer proposed “ First Come First Serve” basis of allotment without first putting a proper machinery and system in place to monitor and announce to the Public the level of subscription of the quota in each category if not on hourly basis, at least on the end of day basis.
2. How can such half cooked prospectus be submitted to SEBI by such reputed and large Merchant Bankers and issuers?
3. How can SEBI overlook the absence of the system and mechanism to announce the subscription level in each category?
4. On what basis less than 50% interest ( 4% instead of 8.3%) is allowed to be paid to investors on non allotment?
To remedy the situation and to protect investors may I suggest the following directions by SEBI:
A. Put on hold any future issues promising allotment on “ First Come First Serve” till such time that they have a proper machinery and system in place to monitor and announce to the Public the level of subscription of the quota in each category if not on hourly basis, at least on the end of day basis.
B. Ask NHAI & PFC to announce the level of subscription under each category on daily basis
C. Direct NHAI & PFC to pay interest @ same coupon rate i.e. 8.2% or 8.3% on non allotted amount as well rather than 4%.
D. Direct NHAI & PFC to stop accepting additional subscription the moment it reaches FULL level or may be 110%-- allowing 10% for rejection, cheque bouncing etc.
E. In your internal ranking of Merchant Bankers performance, put negative marking for submitting such faulty proposal for your clearance.
Shall be obliged to hear from you at the earliest.
Thanking you,
Yours truly,
Arun Goenka
Thursday, December 29, 2011
Tuesday, April 12, 2011
Open offer of ISPAT & treatment of Preference Shares
Further to my letter dated April 6, 2011, I have done more research and all the results are pointing a needle suspicion towards all the parties involved- Ispat Industries--The TC , Jindals—the Acquirer, Mittals—the sellers and co-promoters of the TC. Kindly consider the following points:
On 20th December 2010, the Board Of Directors of the Target Company (TC) passed inert-alia that Preferential allotment will be made to the acquirer –JSW and 0.01% Cumulative Redeemable Preference Shares will be converted into Equity @ 19.85 per share.
On this news, 0.01% Cumulative Redeemable Preference Shares moved from 3 to 10.
While ISPAT took immediate action for Preferential allotment will be made to the acquirer –JSW and approved it in its EGM dated 18th January 2011, it did nothing till date for conversion of 0.01% Cumulative Redeemable Preference Shares
JSW revised the price of Open Offer to 22.25 , close to the market price. This revision is infructuous. It was not likely to make any difference to the no. of shares that will be tendered in the Open offer. The objective of the revision is very perplexing.
Just before the closure of the offer, the prices of the shares jumped with high volumes and at the same time that of 0.01% Cumulative Redeemable Preference Shares started falling.
The EGM’s proceedings available on the BSE website states that the meeting was held at KALAKUNJ Kolkata, where 602 members attended the meeting in person and 12 were present as proxy. It needs to be noted that capacity of the hall is approx 250 only where the co. claims that 614 persons attended it.
You are requested to Kindly
(i) Investigate the matter thoroughly to ascertain if there is a an attempt for market manipulation by first announcing the conversion of Preference shares causing the prices to jump from 3 to 10 and then not taking any action on it causing the prices to fall to 7.55. The slide continues. Investors have lost money heavily.
(ii) Investigate for insider trading- who are selling the preference shares now? Are these people in possession of any information that is not known to the market? Is there any plan by Isapt to cancel/defer the conversion of Preference shares?.
(iii) To safeguard the interest of small investors, direct ISPAT to come out with a categorical statement giving the timeline for conversion.
(iv) Check the participation in the Open offer. If the participation is more than couple of thousands ( accepting that some investors might have tendered their shares by mistake) then it must be further investigated. Who would tender their shares at a much lower price rather than selling them in the market for ready payment and Tax benefits.
(v) In addition to points raised in my letter dated April 6, 2011, direct the acquirer to accept EVERY Preference shares in the Open offer @ 22.25 since they are at par and as good as equity shares—Paid up value 10 with voting right. since dividend has not been paid on them for a period exceeding the time specified under section 87(2)(b) of the Indian Companies Act 1956, thus making it at par with equity shares of the company.
On 20th December 2010, the Board Of Directors of the Target Company (TC) passed inert-alia that Preferential allotment will be made to the acquirer –JSW and 0.01% Cumulative Redeemable Preference Shares will be converted into Equity @ 19.85 per share.
On this news, 0.01% Cumulative Redeemable Preference Shares moved from 3 to 10.
While ISPAT took immediate action for Preferential allotment will be made to the acquirer –JSW and approved it in its EGM dated 18th January 2011, it did nothing till date for conversion of 0.01% Cumulative Redeemable Preference Shares
JSW revised the price of Open Offer to 22.25 , close to the market price. This revision is infructuous. It was not likely to make any difference to the no. of shares that will be tendered in the Open offer. The objective of the revision is very perplexing.
Just before the closure of the offer, the prices of the shares jumped with high volumes and at the same time that of 0.01% Cumulative Redeemable Preference Shares started falling.
The EGM’s proceedings available on the BSE website states that the meeting was held at KALAKUNJ Kolkata, where 602 members attended the meeting in person and 12 were present as proxy. It needs to be noted that capacity of the hall is approx 250 only where the co. claims that 614 persons attended it.
You are requested to Kindly
(i) Investigate the matter thoroughly to ascertain if there is a an attempt for market manipulation by first announcing the conversion of Preference shares causing the prices to jump from 3 to 10 and then not taking any action on it causing the prices to fall to 7.55. The slide continues. Investors have lost money heavily.
(ii) Investigate for insider trading- who are selling the preference shares now? Are these people in possession of any information that is not known to the market? Is there any plan by Isapt to cancel/defer the conversion of Preference shares?.
(iii) To safeguard the interest of small investors, direct ISPAT to come out with a categorical statement giving the timeline for conversion.
(iv) Check the participation in the Open offer. If the participation is more than couple of thousands ( accepting that some investors might have tendered their shares by mistake) then it must be further investigated. Who would tender their shares at a much lower price rather than selling them in the market for ready payment and Tax benefits.
(v) In addition to points raised in my letter dated April 6, 2011, direct the acquirer to accept EVERY Preference shares in the Open offer @ 22.25 since they are at par and as good as equity shares—Paid up value 10 with voting right. since dividend has not been paid on them for a period exceeding the time specified under section 87(2)(b) of the Indian Companies Act 1956, thus making it at par with equity shares of the company.
Wednesday, April 6, 2011
Hero Honda Motors Ltd.
TEXT OF MY LETTER SHRI UK SINHA SEBI CHAIRMAN
Welcome to SEBI.
I wish to introduce myself as a CA who is trying to serve the society in a minimal way, by the domain knowledge and expertise that I have over corporate laws & share market. I act as the eye & ear of SEBI and bring to its notice irregularities & illegalities especially in the sphere of TAKEOVER without any fear or favour. I am a humble takeover watchman.
I have been interacting with SEBI for more than a decade mainly on the cases involving Takeover, Delisting & Buy back. I have gain a very little recognition in the sense that points raised by me are not always ignored by SEBI and from time to time my views are sought by the media.
I have worked on more than 50 cases with SEBI. The open offer of Falcon Tyres & Dunlop were the result of my alerting SEBI. In many cases I am very much disappointed by the attitude of SEBI. In one case—Tata Tele (Maharastra) Ltd. (TTML) I had to go to even High Court where the case was closed in a very wrongful manner. The wrong judgement passed is a matter of record. This made be realize that the best option I have is with & through SEBI.
I believe I am the first person to raise the issue of “Non-compete fees” and the very poor implementation of Reg.12 of SAST by SEBI. I have always tried to help SEBI by alerting it, supplementing its efforts in proper enforcement, and framing rule & regulations.
I have many pending issues with SEBI which I will take liberty to raise later and if you are kind enough, in a personal meeting with you. As of now I wanted to bring to your notice the very high profile and first such big case after you assumed office—HERO HONDA.
In an editorial today, Financial Express has also raised many questions as to the interest of minority shareholders. I however wish to restrict myself to the area I know best—TAKEOVER.
It is commonly believed that Munjal’s purchase of shares from Hero Honda does not trigger any Open offer because of the purchase being from a Foreign collaborator- Reg. 3 (1) (e) (iii)(a).
But this view is not correct. Please read the Explanation to the above.
14[Explanation.- (1) The exemption under sub-clauses (iii) and (iv) shall not be availableif inter se transfer of shares is at a price exceeding 25% of the priceas determined in terms of sub-regulations (4) and (5) of regulation20.";
The simplified version would be The exemption shall not be available if transfer of shares is at a price exceeding 25% of the price
“at a price exceeding 25%” means difference in price being 25% which could be either side—higher or lower. Otherwise a strict English meaning of the above will give an absurd result. For example lets take a case as follows.
The price as per 20 (4 & 5) 100
25% of the price 25
Transfer price 100
In the above case, if the shares are transferred at 100 even when The price is also 100, it will trigger an open offer because 100 is exceeding 25% of the price. In other words if the price is above 25 then it will trigger an open offer. But this we know is not the intent of the law. The intent of the law is, if the price differential is more than 25% the benefit of the exemption is lost.
In the case of Hero Honda the price differential is 50%. Munjal’s are buying the share @ 740/- as against the market price today( March 10, 2011) of 1537/-.
You are requested to please investigate the matter and issue necessary directives to Munjals for coming out with an open offer for the share holders of Hero Honda Ltd.
Welcome to SEBI.
I wish to introduce myself as a CA who is trying to serve the society in a minimal way, by the domain knowledge and expertise that I have over corporate laws & share market. I act as the eye & ear of SEBI and bring to its notice irregularities & illegalities especially in the sphere of TAKEOVER without any fear or favour. I am a humble takeover watchman.
I have been interacting with SEBI for more than a decade mainly on the cases involving Takeover, Delisting & Buy back. I have gain a very little recognition in the sense that points raised by me are not always ignored by SEBI and from time to time my views are sought by the media.
I have worked on more than 50 cases with SEBI. The open offer of Falcon Tyres & Dunlop were the result of my alerting SEBI. In many cases I am very much disappointed by the attitude of SEBI. In one case—Tata Tele (Maharastra) Ltd. (TTML) I had to go to even High Court where the case was closed in a very wrongful manner. The wrong judgement passed is a matter of record. This made be realize that the best option I have is with & through SEBI.
I believe I am the first person to raise the issue of “Non-compete fees” and the very poor implementation of Reg.12 of SAST by SEBI. I have always tried to help SEBI by alerting it, supplementing its efforts in proper enforcement, and framing rule & regulations.
I have many pending issues with SEBI which I will take liberty to raise later and if you are kind enough, in a personal meeting with you. As of now I wanted to bring to your notice the very high profile and first such big case after you assumed office—HERO HONDA.
In an editorial today, Financial Express has also raised many questions as to the interest of minority shareholders. I however wish to restrict myself to the area I know best—TAKEOVER.
It is commonly believed that Munjal’s purchase of shares from Hero Honda does not trigger any Open offer because of the purchase being from a Foreign collaborator- Reg. 3 (1) (e) (iii)(a).
But this view is not correct. Please read the Explanation to the above.
14[Explanation.- (1) The exemption under sub-clauses (iii) and (iv) shall not be availableif inter se transfer of shares is at a price exceeding 25% of the priceas determined in terms of sub-regulations (4) and (5) of regulation20.";
The simplified version would be The exemption shall not be available if transfer of shares is at a price exceeding 25% of the price
“at a price exceeding 25%” means difference in price being 25% which could be either side—higher or lower. Otherwise a strict English meaning of the above will give an absurd result. For example lets take a case as follows.
The price as per 20 (4 & 5) 100
25% of the price 25
Transfer price 100
In the above case, if the shares are transferred at 100 even when The price is also 100, it will trigger an open offer because 100 is exceeding 25% of the price. In other words if the price is above 25 then it will trigger an open offer. But this we know is not the intent of the law. The intent of the law is, if the price differential is more than 25% the benefit of the exemption is lost.
In the case of Hero Honda the price differential is 50%. Munjal’s are buying the share @ 740/- as against the market price today( March 10, 2011) of 1537/-.
You are requested to please investigate the matter and issue necessary directives to Munjals for coming out with an open offer for the share holders of Hero Honda Ltd.
Thursday, August 26, 2010
ZENOTECH
TEXT OF THE LETTER WRITTEN TO SEBI & ORS.
The unanswered questions-- Corrigendum dated 23 August,2010 –Open offer of Zenotech Laboratories Limited.
It seems that with an idea to scare Dr. Jayaram Chigurupati into submission, in the above corrigendum it has been written in Bold & In Caps under the Title IMPORTANT INFORMATION that The acquirer do not intend to acquire any share outside the offer or to come out with a follow on offer or a delisting offer etc.
What is required to be stated has not been stated, but the Acquirer & Merchant Bankers have otherwise gone much beyond in making a futuristic statement.
On the lighter side, it reminds me of the popular Hindi Film-ARADHANA & a song in the film wherein the heroine says “MAIN SAB KAHUNGI LEKIN WOH NAA KAHUNGI JISKA TUMKO INTAJAAR HAI…” (I will say everything but not what you are waiting for)
It is difficult to understand why are they shying away from making a simple admission of a mistake that although it has been stated in The letter of Offer (LOO) dated July 26, 2010, that Dr. Jayaram Chigurupati can tender the shares, actually he cannot tender them in view of the CLB order dated August 3, 2010 and that even if he tenders in violation of the said order it will not be considered in terms of Letters of Offer (13 December 2007 & 26 July 2010) .
I have tried my best to get the mistake corrected but failed till now. I hope at least SEBI will not allow them to consider any shares tendered by the old promoter in contravention of CLB order and terms of Letters of Offer (13 December 2007 & 26 July 2010)
You may take whatever action you may deem proper.
The unanswered questions-- Corrigendum dated 23 August,2010 –Open offer of Zenotech Laboratories Limited.
It seems that with an idea to scare Dr. Jayaram Chigurupati into submission, in the above corrigendum it has been written in Bold & In Caps under the Title IMPORTANT INFORMATION that The acquirer do not intend to acquire any share outside the offer or to come out with a follow on offer or a delisting offer etc.
What is required to be stated has not been stated, but the Acquirer & Merchant Bankers have otherwise gone much beyond in making a futuristic statement.
On the lighter side, it reminds me of the popular Hindi Film-ARADHANA & a song in the film wherein the heroine says “MAIN SAB KAHUNGI LEKIN WOH NAA KAHUNGI JISKA TUMKO INTAJAAR HAI…” (I will say everything but not what you are waiting for)
It is difficult to understand why are they shying away from making a simple admission of a mistake that although it has been stated in The letter of Offer (LOO) dated July 26, 2010, that Dr. Jayaram Chigurupati can tender the shares, actually he cannot tender them in view of the CLB order dated August 3, 2010 and that even if he tenders in violation of the said order it will not be considered in terms of Letters of Offer (13 December 2007 & 26 July 2010) .
I have tried my best to get the mistake corrected but failed till now. I hope at least SEBI will not allow them to consider any shares tendered by the old promoter in contravention of CLB order and terms of Letters of Offer (13 December 2007 & 26 July 2010)
You may take whatever action you may deem proper.
Thursday, July 22, 2010
NEW TAKEOVER CODE My suggestion accepted
Some of my most significant suggestions to the SEBI committee for the review of Takeover Regulations were accepted.
SEBI had notified minimal changes in the Code –only 4. Vide notification dated November 06, 2009,
The amendment in Regulation 11 (1) is as per my suggestion.
Similarly I believe I was the first proponent of disallowing Non Compete fees. In the new draft My suggestion for disallowing Non-compete fees has been accepted.
Yet I am not happy because one of my main points – defining control & company so as to bring into the net asset sale route—Piramal, Gwalior chemicals, Orchid chemicals, Eicher motors, Zicom etc. involving G 1000+ Crs. has not been taken care of. I have brought this to the notice of SEBI time & again. I call it “THE BYPASS ROUTE TO SEBI TAKEOVER CODE”
I aired my feelings in an interview with NDTV.
You may simply click the link below to watch the interview which took place on 20 July 2010.
http://www.ndtv.com/news/videos/video_player.php?id=153390
The Businessline ( 21 July 2010) in its editorial also pointed this out as one of the three critical failures of TRAC.
SEBI had notified minimal changes in the Code –only 4. Vide notification dated November 06, 2009,
The amendment in Regulation 11 (1) is as per my suggestion.
Similarly I believe I was the first proponent of disallowing Non Compete fees. In the new draft My suggestion for disallowing Non-compete fees has been accepted.
Yet I am not happy because one of my main points – defining control & company so as to bring into the net asset sale route—Piramal, Gwalior chemicals, Orchid chemicals, Eicher motors, Zicom etc. involving G 1000+ Crs. has not been taken care of. I have brought this to the notice of SEBI time & again. I call it “THE BYPASS ROUTE TO SEBI TAKEOVER CODE”
I aired my feelings in an interview with NDTV.
You may simply click the link below to watch the interview which took place on 20 July 2010.
http://www.ndtv.com/news/videos/video_player.php?id=153390
The Businessline ( 21 July 2010) in its editorial also pointed this out as one of the three critical failures of TRAC.
Friday, February 13, 2009
TTML Case
BSE/MYDOC/AG
18th November 2008
To,
The Chairman SEBISEBI Bhavan,
3rd Floor, B Wing,
Plot No. C-4A, G Block,
Bandra Kurla Complex,
Mumbai: 400 051
Dear Sir,
Reg: Open Offer of Tata Teleservices (Maharashtra) Ltd. (TTML)
Kindly not the following observations in Public Announcement (PA) for Open Offer of Tata Teleservices (Maharashtra) Ltd.
1. Tata Sons Ltd. (TSL) has been teamed up as PAC (person acting in concert) with the acquirer NTT DOCOMO INC. Japan. TSL is already identified as promoter (TSL Holds 20.72% shares in TTML) in the corporate filing by TTML as on 30th September 2008. Thus the Open Offer should be under Reg. 10,11 & 12 and not merely Reg. 10 & 12
2. TSL has been identified as PAC (“Refer clause 8 of PA”) in terms of Regulation 2(1)(e)(1) of the SEBI (SAST) Regulations, however the definition o PAC given in the said clause does not fit TSL. TSL is not acting “for a common objective or purpose of substantial acquisition of share or voting rights or gaining control over the target company” as stipulated in the regulation. Rather TSL’s objectives are just the reverse & contradictory. TSL as such can not become PAC of the acquirer.
3. In clause 4 of PA it is mentioned that (“The Acquirer also proposes to enter into a share Purchase Agreement (“SPA”)”),with TSL to acquire a further 6% of the fully diluted equity share capital of TTSL”) thus on the one hand TSL is selling the shares and on the other wants to buy the shares through the open offer. Such arbitrage opportunities can not be allowed.
4. Even the reputed promoters like Docomo & Tata’s are shying away from acting in a transparent manner and disclosing full facts of valuation. Negotiated price, obligatory for them to disclose as per the regulations, has not been given. Please refer clause 16(a) of PA --against negotiated price it is written ”Not Applicable” This statement is far from truth. When the object and interest is the target company, obviously a specific valuation must have been attributed to Tata Teleservices Ltd. (TTSL) interest in the target company. It is worthwhile to note that the Acquirer & PAC let the whole world know the basis of valuation which has been reported as $354(Rs. 17,271) per subscriber (see attached report).
In the light of the above you are requested to please:
1. Clarify whether a promoter and seller can also be an acquirer for the open offer? If not, TSL may be asked to not act as PAC.
2. As per the press report attached TTSL has been valued at Rs. 50604 Crs. On the basis of 29.30 million subscribers at Rs. 17,271/- ($354) per subscriber, accordingly the valuation for TTML can be worked out. On 20th May 2008 TTML informed NSE that it has crossed 5 Million Subscribers. This means that the valuation of TTML has been considered at Rs.8,635 Crs. Or Rs.45 per share. NTT DOCOMO and Tata’s must be asked to give truthfully the valuation per share of TTML considered for the transaction.
3. The negotiated price as above must be disclosed & in case it is higher than the offer price of Rs.24.70, then the offer price must be suitably revised.
Thanking you
Yours truly,
Arun Goenka
CC
Ms Soma Majumdar--SEBI
Mr. Nikhil Saraf--Lazard
18th November 2008
To,
The Chairman SEBISEBI Bhavan,
3rd Floor, B Wing,
Plot No. C-4A, G Block,
Bandra Kurla Complex,
Mumbai: 400 051
Dear Sir,
Reg: Open Offer of Tata Teleservices (Maharashtra) Ltd. (TTML)
Kindly not the following observations in Public Announcement (PA) for Open Offer of Tata Teleservices (Maharashtra) Ltd.
1. Tata Sons Ltd. (TSL) has been teamed up as PAC (person acting in concert) with the acquirer NTT DOCOMO INC. Japan. TSL is already identified as promoter (TSL Holds 20.72% shares in TTML) in the corporate filing by TTML as on 30th September 2008. Thus the Open Offer should be under Reg. 10,11 & 12 and not merely Reg. 10 & 12
2. TSL has been identified as PAC (“Refer clause 8 of PA”) in terms of Regulation 2(1)(e)(1) of the SEBI (SAST) Regulations, however the definition o PAC given in the said clause does not fit TSL. TSL is not acting “for a common objective or purpose of substantial acquisition of share or voting rights or gaining control over the target company” as stipulated in the regulation. Rather TSL’s objectives are just the reverse & contradictory. TSL as such can not become PAC of the acquirer.
3. In clause 4 of PA it is mentioned that (“The Acquirer also proposes to enter into a share Purchase Agreement (“SPA”)”),with TSL to acquire a further 6% of the fully diluted equity share capital of TTSL”) thus on the one hand TSL is selling the shares and on the other wants to buy the shares through the open offer. Such arbitrage opportunities can not be allowed.
4. Even the reputed promoters like Docomo & Tata’s are shying away from acting in a transparent manner and disclosing full facts of valuation. Negotiated price, obligatory for them to disclose as per the regulations, has not been given. Please refer clause 16(a) of PA --against negotiated price it is written ”Not Applicable” This statement is far from truth. When the object and interest is the target company, obviously a specific valuation must have been attributed to Tata Teleservices Ltd. (TTSL) interest in the target company. It is worthwhile to note that the Acquirer & PAC let the whole world know the basis of valuation which has been reported as $354(Rs. 17,271) per subscriber (see attached report).
In the light of the above you are requested to please:
1. Clarify whether a promoter and seller can also be an acquirer for the open offer? If not, TSL may be asked to not act as PAC.
2. As per the press report attached TTSL has been valued at Rs. 50604 Crs. On the basis of 29.30 million subscribers at Rs. 17,271/- ($354) per subscriber, accordingly the valuation for TTML can be worked out. On 20th May 2008 TTML informed NSE that it has crossed 5 Million Subscribers. This means that the valuation of TTML has been considered at Rs.8,635 Crs. Or Rs.45 per share. NTT DOCOMO and Tata’s must be asked to give truthfully the valuation per share of TTML considered for the transaction.
3. The negotiated price as above must be disclosed & in case it is higher than the offer price of Rs.24.70, then the offer price must be suitably revised.
Thanking you
Yours truly,
Arun Goenka
CC
Ms Soma Majumdar--SEBI
Mr. Nikhil Saraf--Lazard
Tuesday, December 23, 2008
Disa India Ltd.
- BSE Code = 500068
- Face Value of Shares = Rs. 10.00
- Offer Type = u/r 10, 11 & 12
- Offer Rate = Likely to be revised
- Date of Opening = 05 Feb 2009
- Date of Closure = 24 Feb 2009
- Date of Payment = 11 Mar 2009
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