Sebi rejects Castrol (I) shareholders’ demand to extend open offer date

Yagnesh Kansara

Mumbai, Oct 14: The Securities and Exchange Board of India (Sebi) has rejected the request of Castrol India Ltd (CIL) shareholders to keep the open offer for the company’s shares open till the Mumbai High Court (HC) delivers its order on the controversial issue of interest payable by the parent company (Castrol of the UK).

The open offer by Castrol and BP plc (person acting in concert), which opened on September 25, closes on October 24.

The Sebi decision in CIL’s open offer case would have wider implications, especially as the parent company intends to pick up shares in its Indian arm by making an open offer.

However, the aggrieved CIL shareholders may seek redressal either with the regulator or in the court of law.

The cases of two Indian arms of foreign companies — Foseco and RayBan Sun Optics — would have to be seen in the perspective of the CIL’s open offer.

Feeling that the offeror has ignored the interests of small investors, the aggrieved shareholders of these companies have approached Sebi for redressal.

According to a top Sebi source, the CIL shareholders’ demand is “not acceptable” as the company has followed all the norms and has also expressed its willingness to pay the court directed interest, to its shareholders for delay in the open offer.

Further, the Sebi source said the non-acceptability of the
CIL shareholders’ request was also because the status of the application — whether admitted in the court or is in the process
of admission — was not known.

Also, it is not clear whether the court will deliver the final verdict before the offer closes.

“The CIL shareholders have the option of waiting till the HC delivers its verdict on the interest payable by Castrol,” said the Sebi source.
“Also, if the HC delivers its verdict after the open offer closes, the offeror, too, has the option of making a second open offer, if it has not received the shares it intended to in the first open offer.”

Lastly, as regards the CIL shareholders’ demand of highlighting the point of payment of penal interest on the front page of the offer document, the source said, though on inside pages, the offeror has already expressed its willingness to pay the penal interest if directed by the court.

CIL shareholders, in a plaint to Sebi, had said the offeror’s treatment indicates that the seller will receive Rs 350.02 and the acquirer does not acknowledge the Securities Appellate Tribunal (SAT) directive of paying the penal interest.

Therefore, the CIL shareholders are not getting the full and correct picture.”

The SAT had directed the acquirer of CIL, (Castrol UK in this case) to pay penal interest at the rate of 15 per cent per annum along with the offer price of Rs 350.02 for the delay in open offer.

Both the Castrol UK and BP plc have challenged the SAT’s directive in Mumbai HC where their plea is admitted but has not come up for the hearing as yet.