Sebi smells rat in AstraZeneca India arm's delisting bid

Capital market regulator Securities and Exchange Board of India (Sebi) has put a spoke in the wheel of AstraZeneca Pharma India's plan to take the company private.

It has said AstraZeneca can purchase shares in the delisting offer only after seeking approval of the stock exchanges. And, directed the two exchanges, BSE and the National Stock Exchange, to "closely monitor the entire delisting process…and allow the final delisting of its shares only after satisfying themselves that the process has been fair and transparent," said Rajeev Kumar Agarwal, wholetime member of Sebi in an order on Tuesday.

The unprecedented move comes after an investigation by the regulator had raised suspicion that the multinational corporation might have in breach of the rules, collaborated with a foreign investor, the Elliott group, to facilitate its delisting, the process for which is currently on.

An investigation by Sebi, it appears, showed the Elliott group entities, by investing through six different sub-accounts and participatory notes, cornered a large stake in the company during its Offer for Sale (OFS) in May 2013, where AstraZeneca's foreign promoters sold 14.99 per cent stake to comply with the minimum public shareholding requirement.

Sebi says 94 per cent of the shares sold in the OFS were allotted to the Elliott group, despite the share sale getting 2.84 times subscribed. Prior to the OFS, the Elliott group didn't have any holdings in AstraZeneca. However, after the OFS, Elliott group entities purchased more shares in AstraZeneca through the open market and took their total shareholding to 15.52 per cent in the company.

Based on the share purchase pattern and subsequent delisting announcement, Sebi suspects the Elliott group might be aiding AstraZeneca to successfully delist.

"…the entire voting rights of Elliott group were exercised in favour of the delisting proposal. From such a voting pattern, it may be seen that the present delisting would not have been through without favourable voting by Elliott group," said the Sebi order.

The public shareholders of AstraZeneca had approved the company's delisting proposal through a postal ballot, the result of was announced last week.

"The matter requires further examination in this regard. However, at this stage, in the facts and circumstances as mentioned above, the interest of retail investors is supreme in my mind," Kumar said in the order.

Securities and Exchange Board of India ( SEBI )