Idea-Vodafone merger gets conditional nod from Sebi

Green light, with rider: The markets regulator says approval will be subject to its ongoing probe, approvals from public shareholders and the National Company Law Tribunal

The "no-objection" as per Sebi's regulations will enable the companies to file the draft scheme with the National Company Law Tribunal.

Mumbai: The Securities and Exchange Board of India (Sebi) has given conditional approval to the merger deal between Kumar Mangalam Birla-owned Idea Cellular and Vodafone India. It will be subject to the regulator’s ongoing probe and approvals from public shareholders and the National Company Law Tribunal (NCLT).

In its ‘no-objection’ letter on the scheme of arrangement between Vodafone Mobile Services, Vodafone India, Idea, their shareholders and creditors, Sebi said all its conditions must be placed before NCLT while seeking the latter’s approval. “Vodafone welcomes the Sebi approval,” a Vodafone India spokesperson told ET. The Aditya Birla Group, however, was unavailable for comment.

The regulator said Idea has given a voluntary undertaking to Sebi that it will not dispose of shares that were purchased by one of its promoters before the merger announcement, till further directions from Sebi.

“... Any liability eventually held to be valid against the purchases (Idea Cellular Ltd) shall be borne by them. Idea Cellular has also submitted a voluntary undertaking stating, inter-alia, that it will comply with the directions of Sebi in respect of the ongoing examination of the purchase of shares by purchasers before the announcement of the proposed scheme. Idea Cellular has also undertaken that any liability eventually held to be valid against it shall be borne by Idea Cellular,” Sebi noted.

The regulator said it had received a complaint alleging that one of the Idea promoters had purchased 0.23% of Idea shares before the merger announcement, pointing out that these transactions were in violation of securities laws. Sebi said that the complaint also alleged violation of takeover regulations as the shareholding of Idea Cellular would increase to 26% from 21% pursuant to the instant scheme, triggering an open offer obligation.

However, it would be exempt from the open offer obligation if NCLT approves the draft scheme, the regulator said. Sebi has asked Idea to disclose in the ‘abridged prospectus’ and in the notice to shareholders the under risk factors — details about risk associated with the outcome of the Sebi examination. “The validity of the observation letter shall be six months from August 4, 2017, within which the scheme shall be submitted to the NCLT,” stock exchanges said.

ET had, on July 13, reported that Sebi was examining whether the deal would trigger an open offer (by the Aditya Birla Group) under the takeover code. The report also said the regulator had sought information on purchases of Idea shares by Pilani Investment. Idea Cellular submitted the scheme of arrangement with Vodafone to Sebi on April 18.

The $23-billion deal recently got clearance from the Competition Commission of India. The deal, if completed, will c;reate the largest telecom firm in India, poised to take on Reliance Jio Infocomm. Under the terms, both Idea and Vodafone will have equal stakes in the joint venture over a period of time.