Sterlite to move SAT if barred from buyback

Suresh Nair & Prashant Kothari

Mumbai, Aug 21: Sterlite Industries India Ltd (SIIL) is set to move the Securities Appellate Tribunal (SAT) if the company is barred from going ahead with its buyback offer.

However, the company is yet to receive an official order from the Securities and Exchange Board of India (Sebi), barring it from proceeding with the offer.

SIIL had offered to buy back shares at a maximum of Rs 200 per share payable in cash for an amount not exceeding Rs 280 crore.
Analysts say that Sebi’s move is likely to spark off a debate over whether the markets regulator is working for or against the small investor.

Sebi earlier issued an order barring SIIL from approaching the capital markets over insider trading charges.

The order barred SIIL from accessing the capital markets for two years from the date of issue of the order.

Sebi had sought certain clarifications, stalling SIIL buyback offer to its shareholders.

According to a stock broker, the decision by Sebi is in gross variance with its role ie., to protect investor interests and develop the capital market.

Market operators indicate that the conscience keepers of the capital market are actually barring the investor from making an exit at a premium.

The legal issue of whether buy back constitutes “accessing the capital market” is likely to hurt the investor more than the company.

A solicitor when contacted said, “It would be difficult to make a comment on this issue since the order barring Sterlite from going ahead with its buyback plan is not yet available. However, accessing the capital market could encompass both the activities of raising money as well as buying back of shares since in both the cases the company has to approach the capital market. Therefore, in this case, the result of the appeal to SAT may not be in favour of Sterlite.”

Sources said that if a buyback constitutes accessing the capital market, then the company should be barred even from redeeming debentures and preference shares to its investors.

Industry officials said in this case it should be more of logic than legal nitty-gritty that should prevail. The move of Sebi is likely to close the exit route for the small investor, he added.

If the buyback fructifies, the holding of SIIL promoters will rise to 57.29 per cent of the total equity. The promoters hold 32.29 per cent of the total equity in the company.