Did IIFL promoters trigger an open offer?

The share price of IIFL Finance, the Mumbai-based stock broker and financial services company, shot up nearly 10 per cent on Thursday as market players were certain that an open offer had been triggered by the company’s promoters. According to a regulatory filing by IIFL on June 24, the promoter holding and voting rights in IIFL rose above the open offer trigger point of 25 per cent. It meant that promoters will have to announce an offer to acquire more shares from the markets, which saw IIFL’s share price hitting the upper circuit at ₹82.2 in a choppy market.

According to SEBI’s Substantial Acquisition of Shares and Takeover (SAST) rules, when promoter holding and voting rights in the company crosses 25 per cent, it triggers an open offer. On June 24, IIFL said that its promoters had acquired 0.12 per cent additional stake in the company which took their holding to 25.06 per cent in the company from an earlier 24.94 per cent.

SEBI’s SAST says, “No acquirer shall acquire shares or voting rights in a target company, which taken together with shares or voting rights, if any, held by him or by person acting in concert with him in such target company, entitle them to exercise them 25 per cent or more of the voting rights in such target company unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with these regulations.” IIFL’s announcement to the stock exchanges on Wednesday said, “Shares carrying voting rights acquired.”

However, in a clarification to the BSE at 12.54 pm on Thursday the company said, “This is to clarify that the promoter group’s voting rights in the company has not exceeded 25 per cent and promoter group has no intent to acquire more than 25 per cent voting rights in the company or make any public offer.”

Legal experts said the matter will have to be decided by SEBI. “Once the announcement is made, the ball is in SEBI’s court. Takeover Code says that even an expression of interest and not actual acquisition can trigger an open offer,” a securities market lawyer told BusinessLine .

“Four lakh fifty four thousand shares are purchased by me and out of that two lakh fifty thousand shares are sold by our promoter group entity called Ardent. So the net effect is that the shareholding of the promoter group has gone up to 24.99 per cent. I individually do not have 25 per cent shareholding. So it is me, Venkat and promoter group entities put together. As I said, the 2.5-lakh share transfer was missed out and, therefore, the calculations are not correct. But the fact that I have purchased the shares is correct. So, I bought 4.5 lakh shares yesterday, which is 0.12 per cent. But for the promoter group, the total shareholding will not increase over 25 per cent. It really will go up to 24.99 per cent,” Nirmal Jain, promoter, IIFL said.

It remains to be seen if an open offer once triggered can be reversed. SEBI will have to decide on this one, the lawyer said.

”This percentage voting rights had been computed on the basis of an expected delivery of shares, which is yet to take place. Prior to delivery and acquisition of the voting rights, the sale of shares covered by this intimation has been effected and the shares have been delivered. As such, the 25 per cent threshold was never actually crossed,” IIFL has said in its latest filing.

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