The Hindu Business Line : UB open offer in Air Deccan: SEBI clears the air

The Securities and Exchange Board of India has pulled up the UB Group’s merchant banker for making misleading/incorrect statements to the Bombay Stock Exchange in connection with the UB Group’s open offer to the public to buy shares in Deccan Aviation.

SEBI has written to Edelweiss Capital, manager to the open offer managing on behalf of Kingfisher Radio and other UB Group entities, drawing its attention to a news item appearing in Business Line dated July 26, 2007 in this regard. The news item referred to a communication sent to the BSE on July 25, wherein the merchant banker had said that although the draft offer document had been filed with SEBI, the regulator is yet to clear it.

Objection

SEBI has taken objection to this, arguing that the acquirers are in violation of the relevant provisions of the SEBI Regulations on substantial acquisition of shares by investors which triggers an obligation to make an open offer to buy up to 20 per cent of outstanding shares with the public. The regulations require the acquirers to categorically say that they have made firm ‘arrangement for financial resources required to implement the offer is already in place, including details regarding the sources of funds whether domestic i.e. from banks, financial institutions or otherwise or foreign i.e., from non-resident Indians or otherwise.’

SEBI has drawn the merchant banker’s attention to the clause in the ‘public announcement’ issued by the latter which has spoken of a promise by the acquirers (Kingfisher Radio and the other UB Group entities) to make such funds available to fulfill the financial obligations arising out of the open offer.

Point of contention

A promise to make available the requisite funds as opposed to having made firm arrangements, SEBI has contended, is not a good enough legal requirement. Consequently, the question of SEBI withholding its clearance to the open offer does not arise, it said. It has also gone on to point out that the merchant banker’s contention that it has not raised any queries (as contained in the communication to the BSE) is false as SEBI had been consistently been following up with them over telephone and e-mail as to the nature of financial arrangements made for the open offer.

Such assertions, it has contended, tend to show the regulator in poor light and has sought the merchant banker’s explanation besides demanding of it to issue a clarification to the press to state the correct position.

The UB Group’s Senior Vice-President for Legal Affairs, Mr P. Subramani, said its merchant banker, Edelweiss Capital, is dealing with SEBI and, hence, they don’t know the status of the issue regarding the open offer. The merchant banker could not be contacted for its response.

Meanwhile, the Deccan Aviation share closed at Rs 142.05 on Thursday at the BSE against the UB Group’s open offer price of Rs 155.