IPO-bound solar equipment maker Premier Energies Limited is in the eyes of activist investors after it sold an additional 1.92 crore shares, or 30.6% of the issue size, to private investors ahead of its Rs 2,830 crore rupee IPO, which was open for subscription from August 27-29.
Premier Energies' co-promoters - Surender Pal Singh Saluja, Chiranjeev, Charandeep and South Asia Growth Fund – offloaded these shares to 47 individuals and companies at Rs 450 per share, the upper band of it's IPO that is in huge demand in a booming market trading near record highs.
These transactions worth Rs 868.3 crore were conducted on August 23-24, and made public in a notice to investors advertised by the company on August 26. This amount is in addition to the anchor book which opened on August 26 and fetched an additional Rs 846 crore.
The issue now being raised by some investors who were part of the pre-IPO meet held by the company on August 22 is that they were not made privy to the Premier Energies' plans to undertake this private placement shares before the main IPO opened.
An ultra-HNI investor, who declined to be identified, said Premier should have disclosed these plans in the DHRP, as well as informed potential investors during the pre-IPO meetings. These meetings with brokers and analysts were held in Mumbai on August 22. Another investor is asking for market watchdog SEBI to intervene and get this Rs 868-crore transaction added back to the IPO.
Another view comes from Zafar Macha, an activist investor. “It doesn't look nice as a part of corporate governance to unduly favour some entities. Once the DHRP was finalised and the road shows begun, such private transactions should not happen," Macha told BTTV.
“If the promoters want to dilute then they should have added these shares to the IPO and given a fair chance to everybody, including retail investors to participate. This action does not pass the ethical, moral test”, he said, adding that he had sent a complaint in this regard to SEBI pointing out a lacunae in the norms regarding such placements.
“This is something strange and in the normal circumstances should not have been done," J.N. Gupta, Founder of Stakeholders Empowerment Services, told BTTV. ``This creates an information asymmetry." Gupta was a former Executive Director at the Securities and Exchange Board of India. SES is a not-for-profit proxy firm that advises companies and institutional investors on good governance.
Meanwhile, Premier Energies defended its additional sale by saying all transactions were done ``as per applicable norms, rules and regulations. The promoters did them as they wanted to reward some people who helped and partnered them in this journey," it said in a written reply to BTTV.
Significantly, South Asia Fund sold 22.25 lakh shares to Kotak Mahindra Life Insurance Company. Among the three book running lead managers for the hot-in-demand IPO is Kotak Mahindra Capital Company Ltd. Both are subsidiaries of Kotak Mahindra Bank. Premier said such placements have happened in the recent past with respect to other companies and lead managers.
“If SEBI rules allow such significant transactions as addendums then regulations need to be amended to protect small investors. We hope justice will be done by all stake holders who have fiduciary and regulatory duties," Macha said.
A Premier Energies' spokesperson said the investment bank had kept the regulator in the loop. “All placements, transactions have been done as per applicable norms, rules and regulations. The promoter has sold at same price as upper end of the IPO price band and at the same price at which the anchor investors came in. Several similar placements have happened in recent past with respect to other companies and BRLMs (and their sister concerns). The placement stake percentage being sold is a very small percentage of the total holding of the company and the promoters”, the company said in its response.
It further added that the advertisement was released before the public issue opened, and that “even after the placement, the promoters continue to hold majority stake of over 60 per cent in the company”.
Responses to an email questionnaire sent to market regulator SEBI are awaited. The article will be updated once the response is received.