The capital markets regulator also said there 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 BSE and NSE 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".
Last week, the company had informed that shareholders through postal ballot have given their go-ahead to a delisting proposal.
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.
Sebi 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.
Sebi further said its probe found that the OFS bid prices of Elliott group were significantly above the floor price and the then prevailing indicative price.
Elliott group placed their bids in the OFS in synchronised manner through six FIIs/Sub-account and the final bid modifications were made few seconds ahead of the market closing.
Also, the Elliott group had no previous exposure to the scrip of AstraZeneca Pharma India and the present delisting offer has been made within one year of OFS.
"Earlier delisting offers were unsuccessful/rejected as retail shareholders were either demanding price of Rs 3000 per share or were not keen to delist the company. The present delisting offer would not have been through without favourable voting by Elliott group," Sebi found.
The Elliott group and the participating FIIs, with their current shareholding of 15.52 per cent, as against retail investors' 8.89 per cent stake, are in position to ensure that the delisting process goes through even if none of the retail investors offer their shares.
Sebi further said Elliott group had "the potential to influence the delisting price in the proposed delisting offer in the manner that could be detrimental to the interest of these retail shareholders."
Sebi had launched its probe in this case after coming across certain reports stating that the OFS carried out by the company promoters was a deliberate attempt to subsequently get the shares at ease.
"It was also reported that more than 94 per cent of total shares offered through OFS had been subscribed by six Foreign Institutional Investors (FII)," Sebi said.
A further probe by Sebi of the information provided by these six FIIs -- DB International, Suffolk Mauritius Ltd, Morgan Stanley Asia (Singapore), BNP Paribas Arbitrage, Mansfield Mauritius Ltd and Merrill Lynch Capital Markets Espana -- found that end subscribers of the shares sold to them were related to Elliott Group through participatory notes and sub-accounts.
Incidentally, another probe is currently underway after Sebi prima facie found irregularities in Offer for Sale of shares of another company L&T Finance earlier this year and in that case also a Hong Kong-based fund is under scanner for misuse of P-Notes and sub accounts.
In the present case, Sebi said AstraZeneca Pharma India has failed twice in its previous delisting efforts, while another delisting offer was announced earlier this year. The shareholder approval for the proposed delisting through postal ballot was announced last week.
In 2004, the delisting could not happen as the delisting price of Rs 3,000 per share discovered through a reverse book building process was not acceptable to the promoters. In 2010, a delisting proposal was not approved by shareholders of the Indian unit.
As on March 31, 2013, Swedish promoters had 89.99 per cent stake in the Indian company and in order to comply with Minimum Public Shareholding Norms they carried out an OFS for sale of 14.99 per cent stake.
Later, AstraZeneca announced a voluntary delisting in March 2014 and sought shareholders' approval for the same.
From the voting pattern, it was found that 76.1 per cent of the total votes cast and 87.97 per cent of votes in favour of delisting were cast by the two entities of Elliott group.
"Thus, the entire voting rights of Elliott group were exercised in favour of delisting proposal. From such voting pattern it may be seen that the present delisting would not have been through without favourable voting by Elliott group," Sebi observed.
For a delisting offer to be successful, the post offer shareholding of the promoter group should be higher of 90 per cent, or the total of the pre-offer promoter shareholding and 50 per cent of the offer size.
In the present matter, it would be required for Swedish promoter to take its shareholding from current 75 per cent to minimum 90 per cent to make the delisting successful.
Incidentally, Elliott Group holds 15.52 per cent stake, putting them in a position to ensure success of the delisting offer even if none of the retail investors (with their aggregate 8.89 per cent stake) offer their shares, Sebi said.