A company that no one wants. Owners regret acquiring: “We didn’t know”

The transfer of shares was done off-market and it had resulted in transfer of ownership.

In a curious turn of events, promoters of Perfect Octave Media Projects Ltd (POMPL) have said that they are not interested in controlling the company and that, in fact, they didn't even know they were buying the listed firm.

They submitted to the markets regulator, the Securities and Exchange Board of India (SEBI)  that they were made "sacrificial owners" and not "beneficial owners" through the transfer of shares.

The current, reluctant promoter, Rutmarg Commercials, has submitted  that the previous promoter, Ratish Tagde, had mismanaged the company till his resignation from the post of Managing Director, and had left the firm with financial liabilities and no assets. They have also accused the previous promoters of having "jacked up" the company's share price, which collapsed soon after. This is particularly painful because SEBI has asked Rutmarg to make an open offer at nearly 10x the current price of Rs 2.

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The Rs 7.42-crore-market-cap POMPL has been struggling to hold on to its promoters. From June 2017, when it had eight, it steadily lost promoters every quarter till it was left with one--Ratish Tagde--by June 30, 2018.

Rutmarg Commercials has claimed that it thought it was lending money to former promoters Ratish Tagde and Rajni Sharadchandra Tagde against pledged shares. That is, they did not know they would have to take over the company.

The regulator has found that the process for pledging shares — routing the pledge  through depositories — was not followed. The transfer of shares was done off-market, resulting in the  transfer of ownership.

The trouble at POMPL

Rutmarg Commercials, an agrochemical exporter, and its owner K Ganeshkumar, are currently managing POMPL.

POMPL and Kumar have submitted to SEBI that the Tagdes had "resigned and deserted the company" after leaving behind huge liabilities and zero assets, except for video content, for which the copyright wasn't  handed over. They submitted that Kumar was "constrained" to manage POMPL to protect the interests of shareholders, and not for control or acquisition.

Rutmarg submitted that it was not aware of the legalities of pledging and had relied on the Tagdes for the same, and found that it was left holding promoter shares that it had no intention of acquiring. But the regulator held that ignorance of law is not an excuse.

On March 27, 2024, SEBI fined POMPL Rs 4 lakh, and the previous promoters, Ratish and Rajni Tagde, as well as the current promoter, Rs 2 lakh each for not disclosing the change in promoters and violating provisions under Listing Obligations and Disclosure Requirements (LODR)  and Substantial Acquisition of Shares and Takeovers (SAST) regulations.

Reluctant takeover

The current promoters have also been left with a takeover obligation that could cost them heavily.

Also read: Company finds novel reason to duck open-offer: driven by "intense passion for Indian classical music"

In an earlier order relating to the same dispute dated March 13, 2024, the regulator asked Rutmarg to make a public announcement regarding the acquisition of POMPL's shares at the highest price on the dates when an open offer was triggered.

According to SEBI's findings, Rutmarg crossed the threshold for an open offer for POMPL under  SAST regulations on September 12, 2016. It held 27.77 percent of the total shareholding in POMPL on that date.

POMPL's stock is currently trading at around Rs 2, which is  around a tenth of the Volume Weighted Average Price of the scrip — Rs 19.05 — for 60 days following the first-open offer trigger in 2016, according to the SEBI order.

Rutmarg had said that it didn't make an open offer because it had only loaned the money to POMPL because of "intense passion to promote Indian classical music." POMPL ran a television channel, INSYNC, which was dedicated to Indian classical music.

However, SEBI's investigations showed that there was a transfer of ownership and that both parties were aware of this.

The March 13 order noted that Rutmarg and its senior management had "tried to explain the transactions which triggered the open offer obligations by contending that the shares were transferred to their demat account as collateral against funds provided by them to clear the liabilities of the company."

It added: "They (the noticees) have contended that they had no intention of acquiring the shares transferred to their demat account."

But emails exchanged between Ganeshkumar  and the Tagdes indicate otherwise.

For example, an email dated June 1, 2018, from Ganeshkumar to Tagde stated, "The new tranche of about 85 lakh shares, which were transferred, we consider it as a sale to us against the liability assumed by us – pending paperwork as per your signed MOU."