Mumbai, Maharashtra [India]: One of the shareholders from the Dewan Housing Finance Corporation (DHFL)’s had filed a petition seeking a stay on the delisting of the company’s shares; this petition was recently admitted by the Bombay High Court. DHFL’s equity value was to be pegged at zero, once the Piramal group acquires it. DHFL will then be merged with Piramal group’s financial services business.
This case will be heard by the High Court at the end of April; as of now, notices have been sent to all the parties involved.
The current SEBI regulations state that an acquirer, after meeting certain parameters, must come with an open offer with the most competitive prices, which will benefit all the shareholders. But, in this case, the small shareholders are being unreasonably punished by authorities who have valued their shares at zero, without giving any open offers.
The law firm Ganesh & co pointed out that, had such a situation occurred in the US/UK/Singapore, would have required approval from all the shareholders. The restructuring regime in Singapore holds the view that shareholder approval will be required in restructuring involving debt-equity share swaps, or major sales of the assets in pre-packs. But in the Indian IBC and SEBI delisting regulations, creditors get far more power which allows them to dilute the rights of the shareholders.
Punit Nangalia, the shareholder, in this case, submitted to the court that in course of the usual delisting of shares of a listed entity, the offer price for exit to existing shareholders is to be determined through book building. SEBI regulation further states that the floor price will be determined in terms of the Takeover Regulations.
SEBI regulations provide that the acquirer will make an open offer for acquiring shares according to various parameters, and the formulae to arrive at the most competitive prices will be given in an open offer to all shareholders that will also benefit retail Shareholders.
But when it came to the DHFL acquisition, these regulations were not followed, and the retail shareholders are being punished by the authorities for no fault of theirs by being zero valuation.
This petition also challenges the insolvency code, which does give any valuation to retail Shareholders.