The Curious Case Of Astrazeneca!

Published on Sat, Mar 08,2014 | 14:18, Updated at Sat, Mar 08 at 14:18Source : CNBC-TV18 |   Watch Video :

Last year, we called it the curious case of Fresenius Kabi! This month that title goes to another MNC subsidiary - AstraZeneca! Earlier this month, AstraZeneca pharma India announced that it's multinational parent and 75% shareholder proposes to make a voluntary de-listing offer. And instantly the street was crying conspiracy!! Here's why

Last year AstraZeneca India's MNC promoter did an offer for sale bringing down it's shareholding from 90% to 75% - the maximum promoter shareholding threshold prescribed by law. In that OFS, 6 foreign investors were buyers. The floor price was set at 490 rupees a share and the discovered price came in at 620 rupees a share. Conspiracy theorists say AstraZeneca, after having failed at two previous de-listing efforts - in 2004 and 2010 – decided last year to place it's shares with 6 friendly investors, so that in its next delisting effort it would have to deal with fewer retail shareholders. Because the perception is retail shareholders hold out for higher exit prices, making delisting tough. You are wondering how this OFS helps AstraZeneca succeed in delisting – here's how

For a de-listing offer to succeed, it needs a minimum 50% acceptance from the public shareholders. Prior to the OFS AstraZeneca's promoter owned 89.99%, institutional investors owned 1% and retail shareholders owned 8%. So the de-listing would have needed acceptance by at least 4% retail shareholders.

After the OFS – the promoter stake reduced to 75%, FIIs came to own 16%, retail owns 8%. If FIIs play ball, the de-listing needs acceptance from zero retail shareholders.

The allegation is that this friendly placement hurts true price discovery, violating the delisting regulations in spirit. It's not a new conspiracy theory – the same had been alleged against Fresenius Kabi and but SEBI lost that case in SAT on grounds of unsubstantiated complaints. Will AstraZeneca prevail as well? To discuss that I am joined by PR Ramesh, formerly with SEBI, now with ELP and Kotak's Sourav Mallik.

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