Sebi orders scrutiny of AstraZeneca India delisting

Suspecting violation of norms to check fraudulent and unfair trades, the Securities and Exchange Board of India (Sebi) has ordered close monitoring of a proposed delisting of Indian unit of global pharma giant AstraZeneca.

The company had last week informed that shareholders through postal ballot have given their go-ahead to a delisting proposal.

The capital markets regulator said on Tuesday that there also appeared to have been a coordinated and concerted attempt by the Swedish promoters of AstraZeneca Pharma India and a Hong Kong-based fund house Elliott Group during a previous Offer for Sale of the company's shares.

This is the second case within a month where a Hong Kong-based fund has come under scanner for suspected foul play in an Offer For Sale (OFS) through use of participatory notes (P-Notes) and sub-accounts.

While Sebi is still continuing its probe into the matter, the regulator passed a seven-page late night order asking Bombay Stock Exchange and National Stock Exchange to "closely monitor the entire delisting process of AstraZeneca Pharma India Ltd and allow the final delisting of its shares only after satisfying themselves that the process has been fair and transparent".

The two stock exchanges have also been asked to promptly report any aberrations noticed in the delisting process while the promoters of the company would be able to finally purchase the shares from public shareholders only after seeking approval from the BSE and the NSE.

The Sebi order has come into effective effect.

The regulator said its preliminary probe raises "suspicion that Elliott group might be working in collaboration/concert with the promoters of AstraZeneca Pharmaceuticals Sweden to facilitate the delisting of AstraZeneca Pharma India Ltd".

During an Offer for Sale undertaken by the Indian company's promoters in 2003, Sebi said, the seller broker (ICICI Securities) had conducted more than 60 road shows prior to the OFS and the OFS floor price was at significant discount to prevailing market price.

"Still only Elliott group was allocated 94.02 per cent of shares offered through OFS and the the Floor price was kept at Rs 490 against the previous day's closing price of Rs 805.3, which made the bids (2.84 times over-subscription) in the OFS hover around this price only. This facilitated the Elliott group to mop up almost all the shares (that is 94.02 per cent) offered in OFS at an average price of Rs 625.35 which is lower than previous day's closing price by Rs 179.95," Sebi said.

The regulator further said: "If suspected concerted/coordinated action of AstraZeneca Pharma Sweden and Elliott group is found true then their act/conduct may amount to contravention of Sebi (Prohibition of Fraudulent and Unfair Practice Relating to Securities Market) Regulations, 2003. The matter requires further examination in this regard," the regulator said, but allowed the delisting process to go ahead at this stage in the interest of retail investors and keeping in mind the "facts and circumstances" as of now.