Mint reported on 10 August Sebi, following investor complaints, is examining whether the price offered to minority shareholders as well as the valuation is fair, and whether it needs to be revised
ABB Power Products and Systems India Ltd on Saturday informed exchanges that it is increasing the offer price for shares it plans to buyback through an open offer.
The move comes after investor complaints that the offer price was not fair to minority investors. Mint reported on 10 August that the Securities and Exchange Board of India (Sebi), following investor complaints, is examining whether the price offered to minority shareholders as well as the valuation is fair, and whether it needs to be revised.
“The Acquirers and the PAC (person acting in concert) have decided to revise the offer price upwards from ₹865.92 per Offer Share to ₹872.68 per offer share, consisting of ₹851 per offer share plus interest of ₹21.68 per offer share, computed at the rate of 10% per annum, for the period between 30 March 2020 (being the date of making the public announcement) and 1 July 2020 (being the date of completion of closing)," said ICICI Securities, merchant banker of ABB Power’s open offer.
ABB Power, which was hived off from ABB India Ltd when the parent sold its power grid business to Japan’s Hitachi Ltd, debuted on exchanges in March through a demerger. The merchant banker had considered the date of listing as 30 March and considered the target company as infrequently traded. The mandatory open offer was announced in June jointly by parent ABB Group and Hitachi for acquiring 25% of the public shareholding of ABB Power at ₹865.92 apiece. ABB had arrived at the open offer price based on the valuation done by Bansi S Mehta and Co and EY.
ABB Power has increased the offer price to include interest for the month of April, May and June. The open offer was announced in March.
It is yet to be seen if the marginal increase in the offer price will satisfy investor expectations.
Investors, in their complaints, had claimed that the parent company ABB India was frequently traded at the time of the transaction in 2018, and consequently, the resultant company must be treated as a frequently traded company and its valuation should have been done based on that price instead of March 2020. The valuation in March 2020 came at a depressed price due to covid-19 impact, they said.
ABB Power’s stock exchange filing on Saturday said that the timing of the valuation exercise was not dependent on market conditions, but was instead undertaken based on the date of publication of the public announcement.
“The timing of the valuation exercise was thus dependent on the date of listing of the Target Company, i.e., the date on which the SEBI (SAST) Regulations became applicable to the Target Company and had no correlation with the onset of the covid-19 pandemic or the depression in the stock markets," it said.
The valuers were appointed in December 2019 prior to the onset of the covid-19 pandemic and had issued their valuation reports on 24 March 2020 which was prior to the date of listing of the target company and publication of the public announcement, said ABB Power in the filing.
A merchant banker advising minority investors in the tussle, speaking on the condition of anonymity, said that Sebi should consider getting an independent valuation done.
“In the past whenever there was a dispute on the open offer price or delisting price being offered by foreign companies to Indian investors Sebi has appointed an independent valuer. Take for instance the case of Linde India Ltd and Federal Mogul Goezte India. The same should be done in this case too, to avoid further disagreement," he said.
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