Vodafone-Idea merger: K M Birla, Sebi chief discuss regulatory aspects

Regulator is currently examining if the deal meets the takeover code regulations

Aditya Birla group chairman Kumar Mangalam Birla met with Ajay Tyagi, chairman, Securities and Exchange Board of India ( Sebi) last week to discuss various regulatory aspects of the proposed merger of his telecom arm Idea Cellular and Vodafone India, said people with the direct knowledge of the development.
 

This meeting comes amid concerns raised by several quarters over the proposed structure and arrangement of the merger. A government official said the market regulator has received several complaints from various stakeholders on the proposed merger.

Currently, Sebi is examining if the deal meets the takeover code regulations, besides studying issues related to price discovery as well.

The market regulator had, in May, raised some queries after the Idea Cellular approached the Sebi for seeking its approval for the merger after the latter expressed its concerns in May, as reported by the Business Standard.

An e-mail sent to the Aditya Birla Group companies went unanswered.

In March, Idea Cellular and Vodafone India announced their plans of a merger involving the two entities. In the first stage, domestically-listed Idea Cellular and Vodafone India, which is unlisted, would merge their operations at a swap ratio of 1:1. Then, Birla's holding companies would buy a 4.9 per cent stake from Vodafone at a price of Rs 110 per share, investing close to Rs 3,900 crore.

This would increase Idea's stake to 26 per cent and bring down Vodafone Plc's stake to 45.1 per cent. The Birlas would have the right to acquire another 9.5-9.88 per cent stake from Vodafone in the next four years, so that both partners eventually hold an equal stake of about 35.6 per cent each in the company.

On the proposed arrangement, Sebi had asked the Aditya Birla Group to submit its promoters' share transaction agreement. It had also questioned why this arrangement was made part of the merger scheme.

According to Sebi's issue of capital and disclosure requirements (ICDR) regulation, the company would have to disclose all materially important facts and ensure that all disclosures are true, fair and adequate.

Sources said the market regulator is also looking into the share purchases made by the investment arm of Aditya Birla group- Pilani Investment- in Idea Cellular just before the announcement of the proposed merger.

Sebi is currently examining all the replies submitted by the Aditya Birla Group in response to the regulator's queries, said a source.

Meanwhile, legal experts say that the merger process could take a longer period of time as the nature of Sebi's queries is complex and relatively time-consuming. The process could, however, be simplified, they add.