Delisting case: SEBI ‘censures’ Astrazeneca promoters, foreign investor Elliott

Our Bureau Mumbai | Updated on June 07, 2020

But takes no action as interests of minority shareholders were not harmed

Market regulator SEBI has ‘censured,’the promoters of Astrazeneca Pharma India (AZPI) and Elliot Group for ‘unfair trade practices and professional misconduct,’ while attempting to delist the shares of the company in 2014. SEBI has not imposed any fine or punishment on the promoters.

AZPI is the Indian subsidiary of the British drugmaker AstraZeneca AB and has been making unsuccessful attempts to delist its shares from Indian exchanges for more than a decade. Its hurdle has been a higher price demand by retail investors.

In May 2013, foreign investor Elliott picked up a 15.52 per cent stake in the AZPI via an offer for sale (OFS), a mechanism where the company issues new shares. It was done via foreign institutional investor (FII) sub accounts including DB International Asia, Suffolk (Mauritius), Morgan Stanley Asia (Singapore), BNP Paribas Arbitrage, Mansfield (Mauritius) and Merrill Lynch Capital Markets Espana SA SVB.

In 2014 when AZPI promoters decided to delist, SEBI observed that Elliott decided to tender all its shares. The regulator found that AZPI and Elliott were acting in concert to influence the delisting in a manner that could be detrimental for retail shareholders. The delisting did not go through and in 2016 even before SEBI’s investigations into the matter were on Elliott sold a large chunk of its stake in AZPI.

“I caution the noticees (AZP AB Sweden and Elliott) and direct them to refrain from indulging in such unfair trade practices in future,” SK Mohanty, SEBI Whole Time Member (WTM), said in his order.

He said that his strong ‘censure’ to the noticees was for displaying gross professional misconduct and fraudulent trade practice in trying to arrive at a private arrangement among them so as to help the company sail through the delisting procedure in a manner that was intended to dilute the Reverse Book Building procedure and jeopardising the interests of the retail public shareholders.

On why no action has been taken, Mohanty explained that the scheme of fraud had failed, “though the noticees had conducted their affairs in a very self effacing manner with an ambition to fulfil their goal of delisting without any consideration of the commercial interest of the retail shareholders, providentially their plan to execute their ambition through an artifice or device in the form of pre-arranged negotiated price for delisting could not fructify and interest of the minority public shareholders remained protected and saved from being adversely affected by the probable manipulative actions of the notices. Also, Elliott Group have already divested their stake in the company,” he said.

SEBI has asked stock exchanges to closely monitor the entire delisting process to be initiated by the company in future to ensure compliance with all regulatory stipulations with fairness, transparency and integrity and to promptly report any aberrations noticed in the delisting process of AZPI.

Published on June 07, 2020

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