The Securities and Exchange Board of India (Sebi) and its exchanges have given their conditional approval to the merger 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), a PTI report said on Tuesday.
Vodafone India and Idea Cellular had announced the merger of their operations in March this year to create the country's largest mobile phone operator worth more than $23 billion with a 35 per cent market share.
The $23-billion merger deal would be subject to the outcome of an ongoing probe by the regulator and approvals from public shareholders and National Company Law Appellate Tribunal (NCLT). The multi-layered deal was announced in March and recently got clearance from the fair trade regulator Competition Commission of India (CCI).
In their no-objection letters on "draft composite scheme of amalgamation and arrangement among Vodafone Mobile Services, Vodafone India and Idea Cellular and their respective shareholders and creditors", BSE and NSE said that all the conditions put forth by the regulator need to be placed before NCLT while seeking its approval.
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.
In its detailed comments on the draft scheme, Sebi said it had received a complaint alleging that one of the promoters of Idea Cellular had purchased 0.23 per cent shares of the company before the announcement of the draft scheme of amalgamation and these transactions by the purchasers were in violation of securities laws, PTI reported on Tuesday.
Sebi has also received complaints about alleged violation of takeover norms as the shareholding of Idea would increase from about 21 per cent to about 26 per cent pursuant to the scheme.
"The said allegations are being examined by Sebi," the report said, quoting the regulator.
Idea has also submitted a voluntary undertaking stating that it will comply with the directions of Sebi in respect of the ongoing examination. It has also undertaken that any liability eventually held to be valid against it shall be borne by Idea, PTI said in its report.
"The acquisition pursuant to draft scheme of arrangement is exempt from the obligation to make an open offer...if the acquisition is pursuant to a scheme of arrangement, inter- alia, including amalgamation, merger or demerger, pursuant to an order of a court or a competent authority under any law or regulation, Indian or foreign. Thus, the said exemption is applicable only if NCLT approves the draft scheme," Sebi said.
The regulator further said an 'abridged prospectus' about the deal will need to contain a risk factor (at number 1) detailing the risks associated with the outcome of the examination by Sebi of the allegations in the complaint.
The company will need to ensure that the scheme clearly provides for voting by public shareholders and that the scheme of arrangement is acted upon only if the votes cast by the public shareholders in favour of the proposal are more than the number of votes cast against it.
The explanatory statement to the notice to shareholders need to disclose prominently that Sebi is examining the allegations with regard to transactions done by the purchasers in the shares of Idea before the announcement of the scheme.
"All the above facts shall be brought to the notice of NCLT," Sebi said.