IIFL Fin in a spot over breach of open offer norms
Firm clarifies, cites technical error for confusion
The IIFL Finance stock hit the upper limit on Thursday, after a regulatory filing showed that the promoter holding had breached the 25 per cent threshold, following an open market purchase by chairman and CEO Nirmal Jain.
Confusion reigned, as the company clarified in an exchange filing: “This is to clarify that the promoter group’s voting rights 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.”
However, a filing on June 24 showed that the total promoter holding had inched up from 24.94 per cent to 25.06 per cent, following acquisition of a 0.12 per cent stake from the open market by Jain, on Wednesday.
IIFL Finance made another regulatory filing on June 25, which stated that promoter entity Ardent Impex had sold 0.07 per cent stake on Thursday. The latest filing showed the combined promoter shareholding at 24.99 per cent, slightly below the open offer trigger of 25 per cent.
The market was abuzz with news of an open offer being triggered, as a result of the promoter shareholding exceeding 25 per cent — following the acquisition by Jain on Wednesday — before the selling by Ardent, which happened on Thursday.
Jain said there was no breach of the limit, given that the selling by Ardent had taken place before the shares reflected in its dematerialised (demat) account.
“There has been a technical error in reporting , which was later corrected. The promoter shareholding is below the open offer trigger of 25 per cent. I had acquired the shares and before the shares came into my demat account, another promoter entity sold. So technically, the voting right didn’t cross 25 per cent, because of which there won’t be any open offer,” Jain told Business Standard.
In the Indian market, a trade is settled on a T+2 basis — two days after buying or selling on the exchange platform.
“…percentage voting rights had been computed on the basis of an expected delivery of shares, which was yet to take place. Prior to delivery and acquisition of voting rights, the sale of shares covered by this intimation was effected and shares delivered. As such, the 25 per cent threshold was never really crossed,” said IIFL Finance, in a filing on Thursday.
J N Gupta, founder of SES (a proxy advisory firm), said that if one went by the law, the shareholding had not been breached. “While the rules are not clear on this, I don’t think it is a breach. Had it seen the same entity buying
THE PROMOTER SHAREHOLDING IS BELOW THE OPEN OFFER TRIGGER OF 25%. I HAVE BOUGHT THE SHARES AND BEFORE THESE COME INTO MY DEMAT ACCOUNT, ANOTHER PROMOTER ENTITY HAS SOLD
NIRMAL JAIN Chairman and CEO, IIFL Finance
and selling, then one could have argued. However, these are two different entities and the shares are not yet reflected in the account.”
Experts believe rules need clarification as to what should be the point of reference — actual acquisition, or credit to the demat account. They said Sebi would have to decide on this issue.
Shares of IIFL Finance ended at ~82.2, valuing the company at ~3,110 crore. A 26 per cent open offer would entail an outgo of about ~800 crore at current market prices.
Shares of other IIFL group firms also rallied on Thursday. IIFL Wealth soared 8.8 per cent, with IIFL Securities surging 20 per cent and 5Paisa Capital rising 15.5 per cent.