ICICI Securities delisting: Sebi starts looking into complaints of vote meddling

In their identical responses to the exchanges, the two firms said they were reaching out to shareholders 'to explain the proposed scheme and the e-voting process with the primary objective of maximising participation in the vote'. Photo: Reuters
In their identical responses to the exchanges, the two firms said they were reaching out to shareholders 'to explain the proposed scheme and the e-voting process with the primary objective of maximising participation in the vote'. Photo: Reuters

Summary

The markets regulator is examining complaints from several shareholders of ICICI Securities who allege that ICICI Bank employees tried to get them to vote for the delisting in late March

MUMBAI : The Securities and Exchange Board of India is looking into allegations that employees of ICICI Bank Ltd had reached out to shareholders of ICICI Securities Ltd to try and influence them ahead of a crucial shareholder vote in March.

At the meeting it was decided to delist ICICI Securities  and merge it with its parent firm. More than 500 shareholders of ICICI Securities coordinated on WhatsApp and social-media platforms to lodge around 70 complaints with Sebi, according to a person in the know.

“Sebi is currently examining multiple complaints. Once there is proper evidence, the regulator will initiate an investigation. What action Sebi will take is difficult to say," the person added.

Manu Rishi Guptha, a Bangalore-based fund manager and a minority shareholder in ICICI Securities said, “Investors have filed 60-70 complaints with Sebi and also complained on the SCORES platform." He added that the key allegations in these complaints are the violation of data privacy of its shareholders by ICICI Securities and the valuation at which the company is being delisted.

Guptha is leading a group of over 100 shareholders of ICICI Securities who last month filed a class action suit with the National Company Law Tribunal (NCLT) against ICICI Bank Ltd’s proposal to delist ICICI Securities from the stock exchanges.

Mint reported earlier that employees of ICICI Bank had reached out to shareholders of ICICI Securities in the days leading up to the crucial shareholder meeting on 27 March, where it was decided to delist the company and merge it with ICICI Bank. 

Both BSE and NSE subsequently sought a clarification from ICICI Bank and ICICI Securities, while experts raised concerns about data-privacy and corporate-governance violations.

In their identical responses to the exchanges, the two firms said they were reaching out to shareholders "to explain the proposed scheme and the e-voting process with the primary objective of maximising participation in the vote". There was an overlap between shareholders and retail customers of the two entities, they said, without elaborating further on how ICICI Bank employees got the personal information of ICICI Securities shareholders. 

A spokesperson for ICICI Bank directed Mint to this response when contacted, while Sebi and ICICI Securities did not respond to queries.

Also read: What’s vexing ICICI Securities’ minority shareholders?

Five shareholders previously told Mint that the bank’s employees had phoned and visited ICICI Securities shareholders at their homes to persuade them to vote in favour of the delisting. Some of the employees even asked for screenshots of their votes as proof, the shareholders said. 

One shareholder we spoke to said they were perplexed about how ICICI Bank employees got their contact details as they had never dealt with ICICI Bank as a customer or shareholder, and were not a customer of ICICI Securities either. Mint could not independently verify if the bank’s employees had attempted to influence the votes of shareholders.

The vote to delist

Minority shareholders voted to delist ICICI Securities and make it a 100% subsidiary of ICICI Bank on 27 March. The bank holds a 74.73% stake in the brokerage firm, with the rest being held by public shareholders.

However, many retail shareholders, who collectively hold about 6% of the company, disagreed with the valuation at which it was being delisted. Shareholders of ICICI Securities will get 67 shares of ICICI Bank for every 100 shares they own of the brokerage firm.

Also read: Quantum MF cries foul on ICICI Securities delisting, complains to Sebi

ICICI Bank and ICICI Securities have said the valuation was arrived at by independent valuers and vetted by independent experts for both the bank and the brokerage business. ICICI Securities was the first company to use a new Sebi rule that grants an exemption from the reverse book-building process for price discovery when delisting a listed subsidiary engaged in a similar business as the parent.

However, some shareholders pointed out that ICICI Securities was listed at a price-to-earnings multiple of around 32x but was being delisted at around 15x. After the delisting vote, these shareholders lodged complaints through Sebi’s online SCORES platform.

Also read: ICICI Securities delisting gets nod from institutional investors despite retail resistance

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