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The Original CHAUKIDAAR ,“TAKEOVER WATCHMAN” since 2007. CA. Arun Goenka* hands-on experience in the share market* deep knowledge of laws and account*one of the early players, pioneered an investment strategy in TAKEOVERS*The WIRC - of The Institute of Chartered Accountants of India, has honoured him with the ‘Recognition of CAs in Social Service’. * often invited by National business news; electronic and print media, for his views on SEBI related matters. * history of red-flagging 100+ cases to SEBI* contributes by giving inputs in drafting amendments to the regulation* Some of the suggestions reflected in subsequent regulatory changes: (a). In takeover of Cairn 3,750 Crores non-compete fees waived off and ultimately Removal of Non-compete fee in 2011 (b) November 2009 amending Regulation 11 (1). (c)Listing agreement baring promoters from voting on related party. (d) Disclosure of past performance by merchant bankers in case of IPO (e) SAST 2011 regulation 10(1)(h), (f) Counter Offer in case of Delisting (g) Interest payment to all in case of delays in Open Offers(05.06.20).

Friday, June 28, 2019

Investors loosing money in manipulation of Open offer dates.- Open Offer of Mindtree by L & T

Content of my letter to SEBI dated 26th June, 2019 is as follows,
We wish to highlight that the Mindtree Open offer by L & T is one of the most manipulative Open Offer in the recent corporate history. Investors are losing money to all the manipulation by L & T Management and their related operators.  It seems that SEBI officials were not vigilant while clearing the Open offer. The offer was cleared with application of mind. The corporate event (payment of dividend) was completely ignored and there is no clarity or direction by SEBI to acquirers for payment of dividend.
The first case in my memory is that of  IPCL where the record date for payment of dividend was falling in the intervening period of date of closure offer but before the pay out of consideration for shares accepted in the Open offer. On my pointing it out to SEBI, the investors’ interest was fully protected and the Acquirers made the payment before the record date and became entitled for dividend. In all subsequent cases it was specifically mentioned that investors shall be entitled for dividend.
Mindtree is a strange case- please note the key dates:
1.    The record date for the Special Dividend and Final dividend is 8th July 2019
2.    Closing date of the offer is 28.06.19
3.    Last date for purchasing the shares for participating I the offer is 26.06.19
4.    Vallan is ending on 27.06.19
5.    Payment for shares tendered in Open Offer will be made on 12.07.19.
6.    Dividend will be finally approved in AGM on 16.07.19
While clearing the Open Offer, SEBI seems to have completely ignored these significant dates. This is playing havoc in the market.  The closing price as on 25th June 2019 on NSE will give you some indication:
1.    Cash 952
2.    June FUT 926
3.    July FUT 890
4.    June 980 PE 51
In the past we had pointed it out to you that how L & T is stretching the law too far and  falsely declared that they have triggered an  Open Offer in Mindtree without  triggering it. Even now there is no clarity with regard to their purchase order for Midtree.
We expect SEBI to act immediately in the matter and ensure that investors’ interest is fully protected. Please ensure that:
a. Dividend of Rs.24, (Special dividend 20 and Final  dividend 4) as already announced is paid to all the investors who have participated in the offer. As per the Letter of Offer L & T is not entitled to any dividend that has been already declared. Relevant Extract given below:  
6.1.2 The Equity Shares tendered under this Offer shall be fully paid-up, free from all liens, charges, equitable interests and encumbrances and shall be tendered together with all rights attached thereto, including all rights to dividends, bonuses and rights offers, if any, declared hereafter, and the tendering Shareholder shall have obtained all necessary consents for it to sell the Equity Shares on the foregoing basis.    

b. Investigate the matter for market manipulation by Operators causing huge loses to investors.
c. Issue general guidance to your officers to please take care of intervening dividend pay-out dates  and vallan dates etc. while clearing any offer.

Shall be obliged receive a formal reply from you. Till date we have not received any reply from anyone for all our previous mails. Neither the Acquirer nor their Merchant Banker bother to even acknowledge our letters.
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Attempt to Cheat small investors for more than 100 Crs. - Open Offer of Mindtree by L & T

Content of my letter to SEBI dated 17th June, 2019 is as follows,

We wish to highlight once again, an attempt by  L & T to cheat the minority shareholders of more than Rs.100 Crores ( Rupees one hundred Crores) This they are able to do with the active connivance of the existing promoters of Mindtree. 
L & T has announced an Open offer for 5,13,25,371 (five crore thirteen lakh twenty five thousand three hundred and seventy one), dividend on these shares will now be paid to the Acquirers instead of the minority shareholders who are tendering the shares. This has been made possible by manipulating and changing the record date by the management of Mindtree.   
On 9th April the company announced the record date (RD) 
“The Record Date for payment of Interim &/ Special Dividend, if approved, will be April 27, 2019.” 
On 17th April 2019 the company has declared that :
“The Final Dividend and the Special Dividend are payable subject to the approval of Shareholders at the Twentieth Annual General Meeting.”
The record date for the Special Dividend and Final dividend has been kept at 8th July 2019,  and the date for closing of the offer is 28.06.19 whereas payment will be made on 12.07.19. Since the shares will be transferred from the account of the  shareholders, they will not get the dividend, although technically they are still the owner of the shares since the payment will not be made till 8.07.19. No ownership can be passed on to L & T till that date. To add further, even if L & T is to pre-pone the date of payment, they cannot be allowed to take advantage of the dividend and the entire dividend @ 24 ( Special Dividend 20 and Final dividend 4) should be passed on to the shareholders  who are tendering the shares.
In their Letter of Offer also it is specifically mentioned that till the date of the Letter of offer all rights to dividend etc. will lie with the  shareholders tendering the share :

6.1.2 The Equity Shares tendered under this Offer shall be fully paid-up, free from all liens, charges, equitable interests and encumbrances and shall be tendered together with all rights attached thereto, including all rights to dividends, bonuses and rights offers, if any, declared hereafter, and the tendering Shareholder shall have obtained all necessary consents for it to sell the Equity Shares on the foregoing basis.     
This clearly states that the rights to dividends already declared are still vested with the shareholders tendering the shares.
You are requested to immediately direct the Acquirer- L & T, to clarify to the shareholders that, the dividend on the shares tendered and even if accepted, will still come to the account of the shareholder who has tendered the shares.
Shall be obliged for your immediate action in the interest of investor protection and maintaining market integrity.

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