The impending merger between IDFC and Shriram Capital
has come under regulatory scanner amid a sharp rally in the two group companies.
According to sources familiar with the developments, the Securities and Exchange Board of India
(Sebi) has directed stock exchanges to collate information on price movement
and trading patterns of the four listed companies belonging to IDFC and Shriram group.
Shares of all the four companies surged ahead of Thursday's announcement that the two groups are set to begin exclusive negotiations for an all-stock merger. IDFC Bank, IDFC, Shriram City Union Finance
and Shriram Transport Finance
gained 18.3 per cent, 8.4 per cent, 5.1 per cent and 9.1 per cent, respectively, during the week. In comparison, the BSE Sensex gained 1.42 per cent, and BSE Bankex 0.84 per cent for the same period.
Earlier this week, stock exchanges had sought clarity from both Shriram and IDFC group companies over media reports about a merger plan. In reply to exchanges, the two groups separately said they would keep evaluating opportunities to enhance stakeholders’ value, and would make adequate disclosures should anything materialise.
“Under the circumstances, we are unable to confirm or deny the news reports. Meanwhile, we cannot comment on market speculations,” IDFC said in a BSE filing on Thursday. “At this point, there is nothing that requires disclosures and we cannot and do not comment on market speculation,” Shriram City Union said in its filing on Thursday.
Sources close to the Sebi
said both the companies could have handled the flow of information in a better manner.
“The market regulator is keeping a close watch on the developments. It wants to ensure that the entities involved followed all mandatory disclosure norms under securities laws,” said a person familiar with the development.
Sources said Shriram Capital, which is not listed, has called for a board meeting on Saturday. IDFC, too, is said to have called a board meeting. However, the company didn’t give any official confirmation till Friday evening.
Exchanges sources said they have readied the information sought by Sebi
and were in the process of submitting the same.
Responding to a query by Business Standard, an IDFC spokesperson said, “As per routine clarifications sought by the exchanges on media speculation, we have replied to the exchanges that we follow all disclosure norms as prescribed by regulations. We confirm we have not received any other communication from the exchanges or the Sebi.