SEBI’s Controversial Exemption Raises Questions; Minority Investors Claim $200 Million Loss Amid Regulatory Scrutiny and Privacy Breach
The plan to acquire its securities affiliate ICICI Securities by ICICI Bank has emerged as a subject of discussion. As per the bank, this transaction intended to acquire the portion of the shares in ICICI Securities of which it is not already a part, with 67 ICICI shares for every one hundred shares in ICICI Securities. Though SEBI gave its nod to the merger in June 2023, this has created much controversy, especially among the minority shareholders.
The heart of the issue revolves around the fact that SEBI has allowed ICICI to stake out from the normal bidding norm set down for delisting, which is intended to make sure that a fair price discovery is made. Usually, such rules require the use of elaborate bidding procedures to determine the proper value of shares. However, SEBI permitted exemption based on the reason that the companies were involved in different lines of operation even though they had close corporate links.
This approval has, however, been opposed by over 100 minority shareholders in ICICI Securities, who are of the view that the merger terms are unfavourable or disadvantageous to them. They have criticized that the proposed merger has undervalued ICICI Securities, worth more than two hundred million in investor value. Their complaints have been further fueled by accusations that the company violated their rights by leaking the minority shareholders’ information to ICICI Bank, hence exposing them to conflict of interests by ICICI securities. Not only has SEBI come out with legal fights regarding the particular case, but it has further fuelled its credibility in general. The regulator is already under pressure about its supervision of the Adani Group after accusations of market manipulation, which have been strongly refuted by the conglomerate. SEBI’s management of the ICICI merger has received further scrutiny in this light.
It is essential to understand that this case represents something more profound than the transaction that took place. The SEBI’s decision to grant a waiver for the ICICI merger might lead to the setting up of a rather regrettable precedent in future M&A deals. This is the reason why such exemptions are a paradox for market integrity; if they are to be granted only to a certain extent, then they can harm the very key principles of market fairness and transparency.
The recent Bombay High Court order asking SEBI to produce the letter which passed the approval in June 2023, reveals the need to enhance transparency in regulatory actions. While the court reflects on the rationale of SEBI’s exemption, the market participants and observers are interested in the criteria applied for the deviation from the standard rules. The effort also lies with SEBI to ensure that its actions are seen as fair and transparent. It will be important for SEBI to answer these questions in the future and ensure its openness to preserve the integrity of the financial markets in India and to protect investors’ confidence.
