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Fresenius Kabi Oncology, a cancer research and anti-cancer products company, has moved the Securities Appellate Tribunal (SAT) over the Securities and Exchange Board of India’s (Sebi) order on minimum public shareholding, which has emerged as an obstacle to its delisting plans.
Earlier this month, Sebi had passed an order, restricting promoter activity for companies not meeting public shareholding norms.
Today, Fresenius requested SAT to allow it to go ahead with its delisting schedule. Fresenius counsel Janak Dwarkadas asked the SAT bench to allow the company to continue with the delisting. “There is a calendar that is set...You have to take regular steps. The whole process would be over in September 2013. The company has to issue public announcements and letters of offer. It should be allowed to take those steps, subject to appeal,” he said.
SAT decided to defer the matter to Monday, since Sebi counsel was absent.
Through an order on June 4, Sebi had restrained 105 companies, including Fresenius, for not complying with the 25 per cent minimum public shareholding norm. On June 3, when the deadline to meet the norm expired, promoter holding in Fresenius stood at 81 per cent. In its order, Sebi had prohibited the promoter of Fresenius from dealing in the company’s shares.
The order has potentially rendered the company’s delisting bid untenable, as technically, the promoters won’t be able to buy back requisite shares from investors. Earlier, promoter holding in Fresenius stood at 90 per cent. In October 2012, the promoters sold nine per cent stake through an offer for sale (OFS). This was aimed at complying with the 25 per cent minimum public shareholding norm. However, later, the company decided to delist from the bourses, instead of selling an additional six per cent stake. Subsequently, it initiated the delisting process.
“If you first decide to go for 25 per cent public float and you change your mind to delist...you virtually can’t…this is what Sebi wants to say…or they haven’t applied their mind. These two can’t run in parallel,” Dwarkadas told the tribunal today.
In April, a report by proxy advisory firm SES said Fresenius could have exploited a “regulatory vacuum” by first cutting promoter holding through an offer for sale and later, deciding to delist. “On May 30, 2012, the company disclosed a letter it had received from its promoter. The letter clearly indicated the objective of the promoters was to eventually reduce the holding of promoters to 75 per cent and increase public shareholding to 25 per cent. It also stated this would be achieved through one or more offer for sale, subject to the approval of the FIPB (Foreign Investment Promotion Board). It did not reveal the intention of promoters to delist the shares,” said an SES report.
The proxy advisory says the OFS route was only made available for companies that either figured in the top 100, in terms of market capitalisation, or those required to increase public shareholding. “Therefore, since the company (Fresenius) is not among the top 100, in terms of market capitalisation, it could have gone for the OFS route only for the purpose of increasing its public shareholding,” it said.
In April, in an email communication with Business Standard, the company had said the decision to delist was due to “certain extraneous events”.
THE STORY SO FAR
OCTOBER 12, 2012: Fresenius promoters sell 9% stake through OFS
APRIL 17, 2013: Fresenius board approves proposal to delist
MAY 25: Fresenius gets shareholder approval to delist
JUNE 4: Sebi bars promoters for non-compliance of MPS
JUNE 19: Fresenius appeals in SAT against Sebi order
