Sterling & Wilson must give exit option to small shareholders: Ingovern

Sterling and Wilson Solar, which has the Shapoorji Pallonji Group as a co-promoter, was listed on the stock exchanges in August 20 last year

Proxy advisory firm InGovern on Thursday asked the market regulator to force Sterling and Wilson Solar promoters to provide an exit offer to its shareholders. The firm in its report, added failure of timely repayment of debt amounts for changes in objects of the public offer.  

"While the objects of the initial public offer (IPO) were to enable the promoters to repay loans amounting to Rs 2,563 crore to Sterling & Wilson Solar within 90 days of listing, the Company has received only Rs 1,000 crore on December 31, 2019,that is, 133 days after listing,” InGovern said.

The statement also said, “This is tantamount to change of objects of the IPO from what was stated in the prospectus. This has resulted in aggrieved minority public shareholders.”

Building a case for the market regulator Securities and Exchange Board of India (SebiI) to take action, the advisory firm in its note added, “In this case, where shareholders have suffered significant erosion in value of their holdings solely due to the non-utilisation of funds as per the objects of offer of the IPO, SEBI must force the promoters to provide an exit offer to shareholders at a price according to Sebi (ICDR) Regulations.”

InGovern pegged the loss to public minority shareholders at Rs 1,700 crore. “This non-fulfilment of obligations by the promoters as per the objects of the offer has resulted in a loss of over 60% in investment value for IPO investors as stock price has fallen from the issue price of Rs 780 to Rs 310 as on January 6, 2020.”

Shriram Subramanian, founder and MD of InGovern said, “The Shapoorji Pallonji group should provide an exit option for public minority shareholders. This is a demand from minority shareholders and SEBI should force the promoters to provide and exit option for minority public shareholders.”

"We completely deny any misleading statements being made in the prospectus. Being an OFS the promoters were under no obligation to mention the utilization of proceeds. In fact the promoters made this disclosure in good faith even though it was not required by law," said the spokesperson for the promoters of Sterling & Wilson Solar said in a statement on the InGovern report.

"According to the report, the object of the offer was to enable the promoters to repay loans, however, factually, the objects of the offer was to provide liquidity to the shareholders along with the benefits of listing of the equity shares including but not limited to enhancing visibility, brand image," the statement added.

On the report's observation on loss of shareholder's investment, the promoter statement said," We would like to state that share movements are for a variety of reasons and there is no rationale for this allegation."