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The Original CHAUKIDAAR ,“TAKEOVER WATCHMAN” since 2007. CA. Arun Goenka* hands-on experience in the share market* deep knowledge of laws and account*one of the early players, pioneered an investment strategy in TAKEOVERS*The WIRC - of The Institute of Chartered Accountants of India, has honoured him with the ‘Recognition of CAs in Social Service’. * often invited by National business news; electronic and print media, for his views on SEBI related matters. * history of red-flagging 100+ cases to SEBI* contributes by giving inputs in drafting amendments to the regulation* Some of the suggestions reflected in subsequent regulatory changes: (a). In takeover of Cairn 3,750 Crores non-compete fees waived off and ultimately Removal of Non-compete fee in 2011 (b) November 2009 amending Regulation 11 (1). (c)Listing agreement baring promoters from voting on related party. (d) Disclosure of past performance by merchant bankers in case of IPO (e) SAST 2011 regulation 10(1)(h), (f) Counter Offer in case of Delisting (g) Interest payment to all in case of delays in Open Offers(05.06.20).

Friday, July 5, 2019

Open Offer of Mindtree by L & T, Invesors’ losing about 100 Crs.

HIGHLIGHTS OF MAIL WRITTEN TO SEBI 

The highlights of key issues  raised in each of these letters is attached herewith for ease of your reference. You will find that all the points are very vital and important, yet they have remained unanswered.
We wish to once again state that Mindtree Open Offer by L & T is one of the most opaque Takeover violating the spirit of the Regulations.
ü  It was falsely stated that Open Offer has been triggered on 18th March 2019.
ü  It was falsely stated that a Purchase order to purchase up to 2.48 Crs. Shares of MINDTREE upto a price of 980 has been  placed with its stock broker Axis Capital Limited on March 18, 2019.
ü  First purchase of shares actually took place is only on  April 30, 2019
ü  Till date the only 1.47 Crs. Shares have been purchased i.e. about 1 crore shares are yet to be purchased, but L & T is not buying it or why its broker Axis Capital is not buying it is a mystery. The shares are available at much lower than 980.
ü  The share purchase order is the KEY INSTRUMENT which triggered the Open offer. This should have been fully disclosed in the Letter of Offer.
ü  There is no clarity and SEBI is not forcing  L& T to come out clean, there is still no answer why the broker AXIS did not buy the shares between the period 18.03.19 to 29.04.19 although the shares were available below the mandate price.
ü  There is no clarity why the broker AXIS is still not buying the shares from the market when the price of the shares is much lower than the Purchase order price?
ü  Any large Purchase order in the public domain impacts the price significantly. L & T must be asked to transparently declare  when it is going to complete its committed purchase of 2.48 Crs. Shares.
L & T IS TRYING TO DEPRIVE THE MINORITY SHAREHOLDERS OF ABOUT 100 CRS. OF SPECIAL DIVIDEND.
1.    A Special dividend of Rs.20/- is still due from Mindtree. To overcome one of our objection it appears L & T has made prepayment on 2 July much ahead of scheduled date of 12 July, just to be beneficial owner of the shares before the Record  date of 8th July 2019. Still, as pointed out in our earlier letter, the dividend cannot be paid to L & T because as per the terms given in the Offer letter  all rights to dividend etc. will lie with the  shareholders tendering the share :
6.1.2 The Equity Shares tendered under this Offer shall be fully paid-up, free from all liens, charges, equitable interests and encumbrances and shall be tendered together with all rights attached thereto, including all rights to dividends, bonuses and rights offers, if any, declared hereafter, and the tendering Shareholder shall have obtained all necessary consents for it to sell the Equity Shares on the foregoing basis.    
2.    MINDTREE  has a history of paying Special dividend. Special dividends in the past were considered as Interim Dividend and paid out accordingly. In this case also, special dividend was bunched together with interim Dividend with RD of 27.04.19 but later on the record date was shifted to 8th July 19.    
On 9th April the company announced:
“The Record Date for payment of Interim &/ Special Dividend, if approved, will be April 27, 2019.” 
On 17th April 2019 the company has declared that :
“The Final Dividend and the Special Dividend are payable subject to the approval of Shareholders at the Twentieth Annual General Meeting.”
3.    The market takes that dividend has been declared on the day the Board announces the dividend and the record date. The impact on the price of Future stock is a proof of this. Scrips where dividend has been declared will be quoted higher in the cash segment and lower in the Future segment. (except for some unique cases where the dividend is higher than 5% of the market price and hence adjustable in the Future price.) Same is the case in MINDTREE.
4.    It may be argued that technically a dividend is declared upon approval by shareholders but interim dividend is paid out without any such approval. For all practical purposes, even a final dividend is considered to have been declared when it is announced by the Board and its Record date is announced.     
5.    As per Regulation 8, the Offer Price cannot be lower than the price at which the Acquirer has acquired the shares. This price is 980 as per the PA dated 18thMarch 2019. At that time the special dividend of Rs.20 was nowhere in sight. In case the dividend of 20 is not given to the Shareholders who have tendered the shares, it will tantamount to reduction in the share price by Rs. 20. The effective Offer price will reduce to 960 only as against the Offer price of 980.
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