Sundaram-Clayton's IPP bid foiled by Sebi

Regulator tells firm its earlier permission allowing placement to less than the mandatory 10 institutions was valid only till June 3

The Securities and Exchange Board of India (Sebi) has refused to extend the validity of a key exemption required to push through placement of shares by Sundaram-Clayton’s promoters to institutional investors. The placement was aimed at meeting the minimum public shareholding norms.

The regulator told the company its earlier permission allowing placement to less than the mandatory 10 institutions was no longer valid, as the June 3 deadline to meet the minimum public shareholding norms, has passed. The company explained this in an advertisement to investors last week, which explained the circumstances surrounding the issue.

The promoters now hold 80 per cent stake in the company, according to the latest shareholding pattern on the exchanges. The placement would have pared the promoters’ share in line with the regulatory requirement of 75 per cent.

The company had actually gone through with the placement after the deadline, but received a communication before the allotment took place. The exchange, through a letter dated June 14, stated the issue was not compliant with Sebi regulations, which require a minimum of 10 allottees to the issue. The registrars have also accordingly informed the banks involved through a letter dated June 17, according to the company’s later communiqué to investors.

Sebi had asked companies to have at least 25 per cent public shareholding, and set a deadline of June 3 by which to complete any necessary share sales to meet the guidelines.

It had made available a number of additional routes, including the offer for sale and the institutional placement programme (IPP).

Sebi had also told companies it would be willing to consider alternative routes, subject to prior approval.

In the case of Sundaram-Clayton, the firm had been allowed to carry out an IPP with less than 10 investors. However, it came out with an issue of 1.26 million shares to institutional investors on June 7, four days after the deadline.

Sebi has moved against 105 companies, including Sundaram Clayton, for not meeting the minimum shareholding norms deadline. It froze the voting rights and dividends for promoters who did not meet the deadline. It also barred directors serving on the boards of companies from taking up fresh positions elsewhere until their companies had complied with the regulations.

An email sent to the company did not elicit a reply.
SUNDARAM-CLAYTON'S DEADLINE WOES
March 12

• Sebi exempts company from need for minimum 10 institutions for placement

June 3

• Deadline for meeting minimum public shareholding norm ends

June 7

• Company comes out with IPP

June 14

• Exchange letter to company saying placement cannot be made

June 17

• Registrar issues instruction to banks to release investor money blocked for the issue