Torrent Pharma says promoters haven't pledged equity, NSE action not needed

Torrent Pharma has said that its promoters have not pledged any equity shares they hold in the company for any purpose, and a surveillance action by stock exchanges was not warranted.

The promoters are obligated to hold a minimum 26 per cent shares and management control of Torrent Pharma during the period of loans the company has taken, it said.

The company was commenting on reports of the National Stock Exchange shortlisting five companies, including Torrent Pharmaceuticals, with higher levels of pledged shares by promoters for surveillance action.

"The promoters of Torrent Pharma have not pledged any equity shares they hold in TorrentPharma for any purpose," the company said in an emailed response to PTI.

Promoters, it said, "are obligated by virtue of certain covenants/negative covenants agreed by Torrent Pharma in the loan agreements executed with various lenders that the promoters shall continue to hold management control (inter-alia holding at least 26 per cent of the equity share capital of Torrent Pharma or otherwise) during the period such loans are outstanding. Further, such obligation is created in respect of loans raised by Torrent Pharma for the purposes of its business."

Torrent said a pledge of shares is a security interest in favour of lenders and can be enforced by sale of such shares in event of default.

On the other hand the covenants/negative covenants agreed under various loan agreements obligate the promoters not to sell a specified portion of their shares so long as loan given to the company is outstanding.

"It may be noted that recently SEBI expanded the disclosure requirements (effective from 01-Oct-19) in respect of promoters shares which are subject to any kind of encumbrance by specifically including the requirement to disclose covenant/negative covenants/non disclosure undertaking given in respect of promoters holding in a listed company. In this context the foregoing disclosure was made by promoter of Torrent Pharma," it said.

This, it said, was made abundantly clear in the disclosures filed with the stock exchange at various point in time.

"Considering there are no pledge on the promoters' holding in Torrent Pharmaceuticals Ltd, we believe surveillance action is not warranted," the firm said, asking NSE to revisit and remove the surveillance action on the stock.

The National Stock Exchange had last week stated that it has shortlisted five companies, including Torrent Pharmaceuticals, with higher levels of pledged shares by promoters for surveillance action.

The exchange will levy a minimum margin of 35 per cent on the respective shares, including on stocks in the derivatives segment.

Max India, DCM Shriram and Jindal Stainless are among the other companies identified for surveillance action, according to a circular dated April 1.