Share buybacks kick up a storm on defunct bourses
MUMBAI: Angry public shareholders of many companies listed on nonfunctional regional stock exchanges are inundating the market regulator with complaints of getting shortchanged by promoters rushing to buy back the shares.
Hundreds of such companies announced exit offers for public shareholders in the past few weeks, following a regulatory diktat that they either get listed on national-level bourses or delist.
In their complaints to the market regulator Sebi and stock exchanges, shareholders alleged the prices offered by the companies for their stake to be abnormally low. They want the share buyback price to be determined through a transparent process and not solely by the bankers hired by the companies themselves.
The stock exchanges of Hyderabad, Coimbatore, Saurashtra-Kutch, Mangalore, Cochin, Bangalore and Ludhiana, and the Inter-Connected Stock Exchange were among 18 regional bourses that were granted approval to exit exchange operations.
There are more than 4,000 companies listed on only these exchanges that have already stopped trading operations. Several lakh people hold shares in these companies, which, according to market estimates, have a combined market capitalisation of more than Rs 2 lakh crore.
In January , Sebi asked companies that are listed on these bourses to submit their plan of action by March 31. This led many of them to rush to delist. The deadline was later extended by three months. “While some managements have offered a fair exit price, a majority of them are offering unusually low prices," said PP Zibi Jose, a Kochi-based investor who owns shares in more than 250 companies. “Most of the valuations done by the registered merchant bankers are according to the companies' requirements, because they (bankers) are paid by the companies.“
NO PRICE DISCOVERY
South-based AV Thomas & Co offered an exit price of Rs 4,662 a share, which was 8.2 times the company's earnings per share of `568 in fiscal 2016. In comparison, the BSE FMCG index's price-to-earnings is 41, said Mahendra Wadhwani, a Mumbaibased investor who holds shares in the company that owns tea plantations and engages in trading, freight forwarding, commodity exports and other businesses.
An AV Thomas & Co spokesperson said the valuation was done by an independent valuer, “who is registered with Sebi as a Category 1 merchant banker and also empanelled with the NSE as an approved valuer“.
Rajagiri Rubber valued itself at `30 crore. In fiscal 2012, it earned Rs 33 crore by selling just 113 hectares of the 1,350 hectares land it owned, according to the company's annual report. Another company , Manjushree Plantations with 22,000 acres of land according to its valuation report, valued its equity shares of `10 each neg atively , and offered an exit opportunity to shareholders at Rs 2 a share.Emails sent to Rajagiri Rubber and Manjushree Plantations didn't elicit any response until press time Tuesday .
Several investors in Schneider Electric President Systems complained to its global promoters and the market regulator about what they alleged a complete lack of effort on part of the management to list its shares. The local management wanted to create conditions to tire the public shareholder to enable easy delisting of the shares at an unfair price of `200 a share, they alleged.
A Schneider Electric spokesperson said the valuation was done as per guidelines by a valuer registered under the NSE's panel and appointed by the majority shareholders of the company . On asking why the company wasn't listing on the BSE, the spokesperson said its paidup capital wasn't enough to meet the listing requirement. Also, the company didn't make any profit for the past three years -another listing condition.
Meanwhile, Wadhwani, the Mumbai-based investor, ap proached the Securities Appellate Tribunal, challenging a Sebi circular dated October 10, 2016 on asking the companies to list on a nationallevel exchange or delist.
“The valuation is a matter of subject and the only way to give justice to the investor is the price discovery method through stock exchanges,“ said Wadhwani, one of the biggest investors in unlisted companies.
Hundreds of such companies announced exit offers for public shareholders in the past few weeks, following a regulatory diktat that they either get listed on national-level bourses or delist.
In their complaints to the market regulator Sebi and stock exchanges, shareholders alleged the prices offered by the companies for their stake to be abnormally low. They want the share buyback price to be determined through a transparent process and not solely by the bankers hired by the companies themselves.
The stock exchanges of Hyderabad, Coimbatore, Saurashtra-Kutch, Mangalore, Cochin, Bangalore and Ludhiana, and the Inter-Connected Stock Exchange were among 18 regional bourses that were granted approval to exit exchange operations.
There are more than 4,000 companies listed on only these exchanges that have already stopped trading operations. Several lakh people hold shares in these companies, which, according to market estimates, have a combined market capitalisation of more than Rs 2 lakh crore.
In January , Sebi asked companies that are listed on these bourses to submit their plan of action by March 31. This led many of them to rush to delist. The deadline was later extended by three months. “While some managements have offered a fair exit price, a majority of them are offering unusually low prices," said PP Zibi Jose, a Kochi-based investor who owns shares in more than 250 companies. “Most of the valuations done by the registered merchant bankers are according to the companies' requirements, because they (bankers) are paid by the companies.“
NO PRICE DISCOVERY
South-based AV Thomas & Co offered an exit price of Rs 4,662 a share, which was 8.2 times the company's earnings per share of `568 in fiscal 2016. In comparison, the BSE FMCG index's price-to-earnings is 41, said Mahendra Wadhwani, a Mumbaibased investor who holds shares in the company that owns tea plantations and engages in trading, freight forwarding, commodity exports and other businesses.
An AV Thomas & Co spokesperson said the valuation was done by an independent valuer, “who is registered with Sebi as a Category 1 merchant banker and also empanelled with the NSE as an approved valuer“.
Rajagiri Rubber valued itself at `30 crore. In fiscal 2012, it earned Rs 33 crore by selling just 113 hectares of the 1,350 hectares land it owned, according to the company's annual report. Another company , Manjushree Plantations with 22,000 acres of land according to its valuation report, valued its equity shares of `10 each neg atively , and offered an exit opportunity to shareholders at Rs 2 a share.Emails sent to Rajagiri Rubber and Manjushree Plantations didn't elicit any response until press time Tuesday .
Several investors in Schneider Electric President Systems complained to its global promoters and the market regulator about what they alleged a complete lack of effort on part of the management to list its shares. The local management wanted to create conditions to tire the public shareholder to enable easy delisting of the shares at an unfair price of `200 a share, they alleged.
A Schneider Electric spokesperson said the valuation was done as per guidelines by a valuer registered under the NSE's panel and appointed by the majority shareholders of the company . On asking why the company wasn't listing on the BSE, the spokesperson said its paidup capital wasn't enough to meet the listing requirement. Also, the company didn't make any profit for the past three years -another listing condition.
Meanwhile, Wadhwani, the Mumbai-based investor, ap proached the Securities Appellate Tribunal, challenging a Sebi circular dated October 10, 2016 on asking the companies to list on a nationallevel exchange or delist.
“The valuation is a matter of subject and the only way to give justice to the investor is the price discovery method through stock exchanges,“ said Wadhwani, one of the biggest investors in unlisted companies.
