Reliance Rights issue- Difficulties to Small investors

TEXT OF LETTER WRITTEN TO SEBI AND MERCHANT BANKERS  OF RELIANCE

The present Rights issue of Reliance has many first to its credit. The biggest Rights issue in the country has come in the most difficult time in the world history, a never heard of event LOCKDOWN. It is completely paperless. The abridged Letter of offer keeps on referring to page nos. of Letter of offer, no such link for which is given in the letter. In spite of the lockdown the entire process has come at a very high speed. Small investors just could not cope with the speed in this lockdown period.  With no newspapers, magazine or postal letters, everything is left to digital world. There is no public transport and no access to cheque books etc.

Many shareholders are likely to miss the deadline for investment. We have been receiving several complaints and grievances from small shareholders.

Please take care of Small shareholders; those who are holding shares valued at less than 2 lakhs as on the record date. The closing date for the issue may be extended. Alternatively a new and unique suggestion may be looked into and implemented. Keeping in mind the objective of putting the funds already collected to good corporate purposes at the earliest, you may allow further time for this segment alone. In essence the scheme for mitigating the difficulties of small investors and senior citizens who cannot move out in the lockdown and are also not tech-savvy, shall work as follows:

1.      Complete the process of allotment against the rights issue as per schedule.

2.      Small shareholders be given preference for allotment of additional shares so that they are not crushed under the financial muscle power of persons with deep pockets.

3.      For allotment of additional shares, the proportionate allotment should start after first allotting 100 shares to all the shareholders who have applied for additional shares.

4.      Small shareholders who could not participate in the rights issue should be given an option to participate and subscribe for their rights up to a further period of 3 months. To enable this, the promoters should give the shares  from their holding, since in any case, the promoters  would have benefited by allotment of additional shares out of such unsubscribed portion.

5.      There are many shareholders who do not have Demat account. They are not  allowed to renounce their holding. This is absurd and robbing them of their valuable property. A female investor complained that she holds the shares in her maiden for which no Demat account was ever opened. She wanted to apply in her married name but is not able to do since she is not allowed to ‘Renounce’ her rights.

You are requested to please take immediate  action to protect the interest of small shareholders and oblige.

Vedanta Delisting

Delisting at 87.50? No way.

Remember 

"गब्बर के ताप से सिर्फ एक ही आदमी बचा सकता है, वह है खुद गब्बर" 

Same is true for Vedanta Delisting. If you abhor the price or the promoter, push the delisting to RBB stage and quote your price.

VEDANTA DELISTING, SHORT NOTE

#VedantaDelisting
After board approval, next is shareholders special resolution. Per Companies Act 3:1 shareholders to vote in favour but per SEBI delisting 2X:1  Public shareholders to vote in favour to move ahead. 

VEDANTA DELISTING - Let's not stymie it.

SMALL INVESTORS’ WELFARE ASSOCIATION

Email : SirenBajao@gmail.com

updated 29.06.20  

Almost everyone is bashing Mr. Anil Agarwal, the billionaire promoter of Vedanta for his move to delist the company. This is more of a trust deficit and his past haunting him. How shabbily he has been treating his investors.  The experts are advising the independent directors to vote against the delisting move in the Board meeting. If the move to delist is shot down in the Board meeting, the share prices will immediately tank by 10-20% or more. That will be the biggest disservice to the investors.

 Let me play the devil’s advocate.

The advice to reject the delisting stems from the proverbial “ DUSSARE KI THAALI ME GHEE JYAADA”  syndrome. The fact that we, as small shareholders are gaining, is ignored because of the perceived great advantage that Mr. Anil Agarwal will get. The delisting at this juncture is in the interest of the investors and has boosted the market confidence in the scrip. Investors were otherwise forced to dump it at a heavy loss. The analysts are coming out with all kinds of data and values for the company shares. No matter how well-meaning are these studies, they do not help investors for whom ‘BHAV BHAGWAN HAI”   

Till the other day everyone was hammering Vedanta stock as worthless. Bringing the prices down from a 52 week hi of Rs.180 on 27-june2019 to a 52 week lo of 60.20 on 30 march 2020.

News about the parents Bonds trading at up to 60% yield amidst rating downgrade by Moody further dampened the spirits. The investors were very uneasy and ready to dump the stock at whatever price they can get.  If we, as a small shareholder were hurt, the promoter as the biggest shareholders was hurt the most. He decided to show the world that the value of his share is much more than the world is willing to give. He said, ‘I am willing to buy the entire outstanding number of shares at Rs.87.50 or at such a price at which the majority of the shareholders are willing to offer me. Of course if the public is asking for the moon, I have the right to reject and walk away.’

On May 12, 2020 the price  went up 12.44% , and closed at 89.50 against the previous day closing of 79.45. Late in the evening we came to know the reason—Delisting proposal by its promoters. Clearly  some people had an advance information of the announcement to come and played the stock. Clearly insider trading was at play.

The key stages in the process of delisting are:

1.     Proposal by Promoters to delist

2.     Board of the target company approving the proposal

3.     Shareholders approving the proposal

4.     Adequate number of shares being participated

5.     The Exit price being acceptable.

6.     Consent of the lenders at Holdco. Bondholders would definitely have covenants that he cannot use the holding co’s income (dividend from vedanta Ltd. is the only income in holding co) for any other purpose except to pay their interest and principal.

It will be only in the interest of the investors if the delisting process is allowed to proceed.

DELISTING PRICE OFFERED-- Rs..87.50

In my role of Devil’s advocate, I feel Rs.87.50 declared as indicative delisting price is absolutely right. The justifications for this price are:

1.     It is the floor price, not a ceiling price. It can always be revised upwards  but can never be down written. Why commit a higher price now in such an uncertain economic scenario?

2.     It is an unwritten rule that the final exit price is minimum 25% higher and on an average, as some study has shown, about 50% higher. If the base price is set higher, it will make the expectations of the investors unrealistic and will cause failure of the whole exercise.

If the delisting fails or is not allowed to proceed, probably Anil Agarwal’s game plan will be defeated  and he will lose some likely advantage he is angling for. But the loss to the public shareholders will be immediate and quite harsh. There are ‘n’ number of failed delisting where  investors lost very heavily. Let’s not repeat it.

In conclusion there is no point in craning out your neck to count  the many mangoes lying on  the other side of the fence. Let’s ripen our mangoes and eat it.

 Twitter: @sebitakeover

ACCELYA SOLUTIONS INDIA LIMITED. Open Offer

SMALL INVESTORS’ WELFARE ASSOCIATION

Regn No. F-72744 (M)

With a legacy of 25 years of investor protection services

TEXT OF LETTER WRITTEN TO SEBI

We have studied the above  DLOO and wish to point out the following anomalies/ apparent errors for your suitable corrective action:

1.     The offer has been triggered by the acquirer acquiring the series  holding co to reach down to level 6 and get hold of 74.66% shares of the target company. As per DLOO Acquirer acquired 

                         i.         Accelya Topco Limited which  holds 100% of the issued share capital of

                       ii.         Accelya Holdco Limited,  which in turn holds 100% share capital of

                      iii.         Accelya Finco Limited holding  100% share capital of

                      iv.         Accelya Midco Limited which in turn holds 100% of the capital of

                       v.         Accelya Bidco Limited. Which holds 100% of the capital of 

                      vi.         Accelya Holding World S.L.U. which in turn holds 11,143,295 equity shares in the Target Company constituting 74.66% of the total issued, paid-up voting share capital of the Target Company.

The offer for balance number of shares will bring the public holding to below the permitted level.

2.    The main/sole objective of such acquisition appears to be the ultimate acquisition of shares of the target co. It has not been clarified if these series of holding companies were holding any other assets.

3.    As per Regulation 5(2)  where the assets etc. of the target company is more than 80% of the consolidated assets, indirect acquisition will be taken as direct acquisition. It has not been clarified in the DLOO that this condition has been tested and holds true.

4.    It has been confirmed in on page 31 of the DLOO in note (2) that conditions of Regulation 8(5) is attracted since the assets etc. of the target company are more than 15% of the consolidated assets.  Regulation 8(5) is applicable only if Regulation 5(2) is attracted  when assets etc. of the target company is more than 80% of the consolidated assets. The following points arise:

                    i.        When the assets are already above 80% what is the purpose of specifying a  lower limit of 15% in u/r 8(5)?

                   ii.        Why it has not been stated in the DLOO that the assets etc. of the target company are more than 80% of the consolidated assets

5.    At page 31 at para 5.1.5, S.No.A, under the heading highest negotiated price, it is written “ Not applicable”. This is not correct. Why such price is not given?

The offer is likely to result in Public holding falling below 25% (DLOO page 6, para 5) yet there is no mention of acquirer’s plan to meet the stipulated level of public holding or to  delist.  

Fortis Open Offer; Supreme Court order dated November 15, 2019

Reg. Fortis Open Offer- SC order analysed 

CONTEMPT PETITION (CIVIL) NO. 2120 OF 2018

IN

SPECIAL LEAVE PETITION (CIVIL) NO. 20417 OF 2017

My key takeaways on Fortis SC order dated November 15, 2019

·       Supreme Court had asked status quo to be maintained with respect to the controlling  stake in Fortis hospital.

·       SC originally ordered on 11^th  August 2017 and  clarified on 31^st  August 2017. Subsequent to  this clarification any sale/transfer of shares by FHHL after 31st August 2017 will not be allowed by the Honorable Supreme Court.

·       Indiabulls and India ventures have transferred the shares in violation of this order and are held as contemnor.

·       On 9th January 2019 Fortis filed an application in SC and stated that transaction between Fortis and IHH was completed on 13. 11. 2018

·       On 15^th  January 2019 Daiichi filed in SC a prayer to restrain Fortis from transferring  4000 crores received from IHHH to Singapore based RHT. Fortis said it has already been transferred on 15.01.2019. The most important w.r.t. Open offer,  is  para 48  given below:

·        

I.A. No.8948 of 2019 was filed by the petitioner on

15.01.2019 stating that FHL is proposing to transfer Rs.4,000/-

crores approximately, received by it [as a result of the transferring

of shares to the IHH Healthcare Bhd. (Malaysian Company)] to RHT Health Trust, Singapore (RHT). Petitioner prayed for restraining this transfer of funds and compliance of order dated 14.12.2018.FHL filed a reply to this I.A., which made it apparent that on15.01.2019 itself FHL had completed the transaction involving acquisition of assets from Singapore based RHT even though it was fully aware that this Court was seized of the matter

·       What is the all important order dated  14.12.2018?

PARA 47 OF THE SC ORDER

47. However, we cannot let the matters stand as they are. On

14.12.2018, this Court had passed the following order:

“Issue notice.

The personal presence of the alleged respondents contemnors

is dispensed with for the present.

Status quo with regard to sale of the controlling stake

in Fortis Healthcare to Malaysian IHH Healthcare Berhad

be maintained.”

The order directs that the status quo with respect to the sale of

controlling stake in FHL to IHH Healthcare Bhd. (Malaysian

Company) should be maintained. We are now told that this sale

had already taken place. This matter needs to be enquired into

and we have to be certain when this sale actually took place and

when was the controlling stake in FHL transferred to the IHH

Healthcare Bhd. (Malaysian Company). Furthermore, on

09.01.2019, FHL moved an application in this Court and stated

that the transaction between the FHL and IHH Healthcare Bhd.

(Malaysian Company) had been completed on 13.11.2018 and

prayed that the order dated 14.12.2018 be modified insofar as it

pertains to sale of controlling stake in IHH Healthcare Bhd.

(Malaysian Company).

Some questions arise:

1.     If the sale had already taken place on 13.11.2018 before the SC order dated 14.12.2018 , why any modification of the that order was prayed for? 

2.     Does the Status-quo order of SC restrain the Open Offer?  Through the Open offer controlling  stake in Fortis is not being sold. Admittedly, Open Offer will help in completing the compliance.

3.     Can Open offer once announced be cancelled? My understanding is quite clear, it cannot be cancelled even if the underlying transaction triggering the open offer fails.

4.     Should legal compliance be restrained? Even when it has no damaging effect on the petitioner or his prayers?

5.     Daichii has not prayed for cancellation/stay/status –quo on sale of controlling stake in FHL.

6.     Daichii’s concern is not the ownership or management of Fortis, its only concern is Funds. Daichii would like to receive the funds rather than it being transferred to MMS & SMS or their entities.

7.     The funds brought in by IHHH for the open offer are lying in Escrow account, would not it be more prudent to allow the Open offer to be completed and if required, the shares acquired in the Open offer be frozen till such time the SC decides?

In the light of the above, may we humbly request you to please intervene in the matter and enlighten the Hon’ble Supreme Court that its order staying the Open offer is  :

1.       Causing misery and loss to thousands of small shareholders.

2.       Causing hindrance in completion of mandatory legal compliance

3.       It does not any way help the Petitioner’s (Daichii) cause

4.       The Petitioner did not even pray for such a stay order.

5.       The petitioner is only concerned with the diversion of funds and the pay out for Open Offer will not go in the hands of FHL or Singh brothers. The payment of about Rs.3,400 Crores will go to thousands of small investors.

6.       If Hon’ble Supreme Court so desires, it may make restraining orders/freeze on the shares acquired in the Open offer.

7.       For the period of delay, the small shareholders must be compensated with interest.

Your immediate action will go a long way in helping the small shareholders.

Thanks & Regards,

For Small Investors’ Welfare Association

Arun Goenka

Authorised Signatory,

My key takeaways on Fortis SC order dated November 15, 2019

CONTEMPT PETITION (CIVIL) NO. 2120 OF 2018

IN

SPECIAL LEAVE PETITION (CIVIL) NO. 20417 OF 2017

My key takeaways on Fortis SC order dated November 15, 2019

·       Supreme Court had asked status quo to be maintained with respect to the shareholding in Fortis hospital.

·       SC originally ordered on 11^th  August 2017 and  clarified on 31^st  August 2017. Subsequent to  this clarification any sale/transfer of shares by FHHL after 31st August 2017 will not be allowed by the Honorable Supreme Court.

·       Indiabulls and India ventures have transferred the shares in violation of this order and are held as contemnor.

·       On 9th January 2019 Fortis filed in application in SC and stated that transaction between Fortis and IHH has been completed on 13. 11. 2018

·       On 15^th  January 2019 Daiichi filed in SC a prayer to restrain Fortis from transferring  4000 crores received from IHHH to Singapore based RHT. Forrtis said it has already been transferred on 15.01.2019. The most important w.r.t. Open offer,   para 48 is given below:

·        

I.A. No.8948 of 2019 was filed by the petitioner on

15.01.2019 stating that FHL is proposing to transfer Rs.4,000/-

crores approximately, received by it [as a result of the transferring

of shares to the IHH Healthcare Bhd. (Malaysian Company)] to RHT Health Trust, Singapore (RHT). Petitioner prayed for restraining this transfer of funds and compliance of order dated 14.12.2018.FHL filed a reply to this I.A., which made it apparent that on15.01.2019 itself FHL had completed the transaction involving acquisition of assets from Singapore based RHT even though it was fully aware that this Court was seized of the matter

·       What is the all important order dated  14.12.2018?

PARA 47 OF THE SC ORDER

47. However, we cannot let the matters stand as they are. On

14.12.2018, this Court had passed the following order:

“Issue notice.

The personal presence of the alleged respondentscontemnors

is dispensed with for the present.

Status quo with regard to sale of the controlling stake

in Fortis Healthcare to Malaysian IHH Healthcare Berhad

be maintained.”

The order directs that the status quo with respect to the sale of

controlling stake in FHL to IHH Healthcare Bhd. (Malaysian

Company) should be maintained. We are now told that this sale

had already taken place. This matter needs to be enquired into

and we have to be certain when this sale actually took place and

when was the controlling stake in FHL transferred to the IHH

Healthcare Bhd. (Malaysian Company). Furthermore, on

09.01.2019, FHL moved an application in this Court and stated

that the transaction between the FHL and IHH Healthcare Bhd.

(Malaysian Company) had been completed on 13.11.2018 and

prayed that the order dated 14.12.2018 be modified insofar as it

pertains to sale of controlling stake in IHH Healthcare Bhd.

(Malaysian Company).

Some questions arise:

1.     If the sale had already taken place on 13.11.2018 before the SC order dated 14.12.2018 , why any modification of the that order was prayed for? 

2.     Does the Status-quo order of SC restrain the Open Offer?  Through the Open offer controlling  stake in Fortis is not being sold. Admittedly, Open Offer will help in completing the compliance.

3.     Can Open offer once announced be cancelled? My understanding is quite clear, it cannot be cancelled even if the underlying transaction triggering the open offer fails.

4.     Should legal compliance be restrained? Even when it has no damaging effect on the petitioner or his prayers?

5.     Daichii’s concern is not the ownership or management of Fortis, its only concern is Funds. Daichii would like to receive the funds rather than it being transferred to MMS & SMS or their entities.

6.     The funds brought in by IHHH for the open offer are lying in Escrow account, would not it be more prudent to allow the Open offer to be completed and if required, the shares acquired in the Open offer be frozen till such time the SC decides?