Sebi asks NSE to evaluate Linde India's related party transactions

Markets regulator Sebi has asked the National Stock Exchange (NSE) to designate a valuer to conduct the valuation of related party transactions between Linde India and Praxair India following complaints by shareholders.

The matter relates to various transactions and agreements by Linde India Ltd (LIL) with its related parties Praxair India Pvt Ltd (PIPL) and Linde South Asia Services Pvt Ltd (LSASPL).

Sebi investigated the case after receiving multiple complaints alleging that transactions and agreements entered by Linde India with Praxair India were in the nature of material related party transactions (RPTs) and Linde India did not obtain shareholders' approvals on these transactions.

In its interim order passed on Monday, Sebi noted that Linde India was executing "related party transactions which prima facie appear to be material, without taking shareholder approval. Such actions effectively deprive public shareholders of an opportunity to express their views on transactions which have the potential to disproportionately benefit controlling shareholders at the expense of the broader shareholder base".

Sebi asked NSE to appoint a registered valuer to carry out a valuation of the business foregone and received, including by way of geographic allocation, in terms of the joint venture and shareholders agreement entered between Linde India and Praxair India that led to the formation of Linde South Asia Services.

Also, the regulator directed NSE to provide the valuation report to both Sebi and the company. Within two weeks of receiving the report, Linde is required to present it to the audit committee and board of directors.

Sebi stated that Linde India must assess the materiality of future related party transactions based on the total value of transactions conducted with any related party in a financial year, regardless of the number of transactions or contracts involved.

Additionally, if the total value of RPTs surpasses the materiality threshold, shareholder approvals must be obtained.

Linde India, formerly known as BOC India, was part of UK-based BOC Group.

LIL is engaged in manufacturing and selling industrial, medical and special gases, equipment and related products, and has a project engineering division.

In 2006, Germany-based Linde AG acquired BOC Group and consequently, BOC India changed its name to Linde India in February 2013.

Later in 2018, there was a global merger between Linde AG and Praxair Inc. This resulted in the formation of Linde Plc, a NASDAQ-listed entity.

After the merger, Linde Plc had two subsidiaries in India - Linde and Praxair India. Subsequently, the two entities - Linde and Praxair India - entered into a joint venture and shareholders agreement, whereby both LIL and PIPL were to hold a 50 per cent stake in Linde South Asia Services, a company engaged in providing administrative and support services to both LIL and PIPL.

While Sebi initiated the investigation, the company moved to the Bombay High Court for a stay on the probe, which was not granted by the court.