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The Securities and Exchange Board of India (Sebi) has expressed some reservations on the merger between Idea Cellular and Vodafone.
The deal between the two entities is facing scrutiny from the market regulator as it has asked them to share details of the merger to take the process ahead.
Sebi has asked the two firms to share the methodology used for the merger process through which they arrived at the share price for acquisition.
The two telecom majors that had announced the deal in March joined hands to fight competition in the telecom sector.
The companies are also being questioned whether the price discovery was in line with the listing regulations, reports Business Standard.
Other queries raised by the regulator include:
>How did the firms arrive at the pricing of shares for the consolidation
> Whether the merger is compliant with the Department of Telecommunications (DoT) regulations.
> Companies have to submit promoters’ share transaction agreement
> Why was the agreement made part of the merger arrangement
To respond to all the questions raised by Sebi, companies have time till May 22. The regulator says that the queries are to make sure that small investors have an opportunity to take an informed decision about their stake in the company.
To get an approval for the merger, both Idea and Vodafone will have to follow multiple steps. The first step to get a nod from the board of director of companies is complete and the scheme of arrangement has also been submitted to the stock exchanges.
Third step involves forwarding of the scheme to Sebi along with their comments. Now, both the entities are waiting for a ‘no objection’ on the merger scheme after which it will be handed over to National Company law Tribunal (NCLT) for its approval.
As per the arrangement, Vodafone will sell 9.5 per cent additional stake to Aditya Birla Group for Rs 130 per share after they merge their telecom operations to create the country's largest operator worth more than USD 23 billion.
Aditya Birla Group has filed with the BSE the composite scheme of amalgamation between Vodafone and Idea Cellular, which stated that the merged entity shall be under the joint control of the two firms and will be governed by the shareholders' agreement.
In the merged entity, Vodafone will hold 50 per cent stake, while Aditya Birla Group hold 21 per cent.
Upon completion of merger, Vodafone will transfer 4.9 per cent shares of merged entity to Aditya Birla Group for Rs 3,874 crore.
Post such transfer, Aditya Birla Group shareholding will increase to 26 per cent and Vodafone shareholding will reduce to 45.1 per cent, according to the scheme.
The remaining 28.9 per cent will be held by other shareholders.
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