Whistle-blower of ICICI fame writes to Sebi, accuses Bharti Telecom of discriminatory resolution plan

Confirming that these minority shareholders have rejected Bharti Group's discriminatory resolution plan, Arvind Gupta says they consider their shares in BTL as a crown jewel and are not willing to divest them at oppressive consideration price of Rs 163.25.

By BusinessToday.In  
Wednesday, July 25, 2018

Whistle-blower Arvind Gupta of the ICICI Bank/Chanda Kochhar fame has fired another salvo -- this time at Bharti Telecom, the holding company of India's largest telecom firm Bharti Airtel. The whistle-blower has submitted a petition to the Security and Exchange Board of India (Sebi) on behalf of the minority shareholders of the Bharti Telecom Ltd to withdraw and revise its capital reduction plan that aims to give exit route for its 1.1 per cent shareholders.

Confirming that these shareholders have rejected Bharti Group's discriminatory resolution plan, Gupta said these shareholders consider their shares in BTL as a "crown jewel" and are not willing to divest them at "oppressive consideration" price of Rs 163.25.

Resolution plan coercive, discriminatory

Gupta, who himself is a shareholder in Bharti Group of companies, said both Bharti Group and SingTel Group are denying small minority shareholders a fair deal and rightful exit from the Bharti Group, after which it will have full control over Bharti Telecom. He called the company's special resolution plan a coercive, discriminatory, illegal and oppressive act of exploitation.

"Post delisting in 2000, the leftover small shareholders never had any right and locus in the growth of Bharti Telecom," said Gupta, adding as these shareholders are scattered all over the world, they couldn't even contest to claim what is rightfully theirs.

The petition alleged that a gang of management patronised market traders have bought out their shares at throw-away prices, and that the same coercive buyout is now being implemented by the Bharti and SingTel groups by abusing the provision of Reduction of Capital under Section-66 of the India Companies Act, 2013.

"From the resolution plan offered by Bharti Group, it is clear that both Bharti Group and SingTel, which together hold 98.91 per cent shares in Bharti Telecom, are working to serve a common interest in order to force the exit of these 4,942 shareholders," Gupta said in his petition. 

Abuse of law

Gupta said that though the provision is uniform and non-discriminatory reduction of capital, the use of Section 66 of the Indian Companies Act for effecting a selective capital reduction to buy out shares held by identified shareholders is untenable.  

Unfair and unjust valuation

Bharti Telecom had decided to offer Rs 196.80 per share -- price consideration is Rs 163.25 per share plus Dividend Distribution Tax (DDT) of Rs 33.25 a share -- to its minority shareholders as part of the exit route. The company said the price consideration per share was derived by a "transparent valuation" of the independent valuer Ernst and Young.  The petition alleged the mandate given by E&Y was also to implement corporate action to favour selective capital reduction. It said the company wants to squeeze DDT of Rs 33.25 per share from the fair value of the share. "DDT is the company's liability and hence in all fairness, BTL will have to bear it," said Gupta.

The petitioner also gave an example of the raising of the preferential issue of funds by Bharti Telecom on January 18 when the fair value of its price was decided at Rs 310 per share. "SingTel paid this value to subscribe to the preferential issue of Bharti Telecom," said Gupta, demanding that the minority shareholders should be paid exit premium and premium of scarcity value of Bharti Telecom shares.

Bharti Airtel, however, has denied all the allegations. It said that "there have been several requests from minority shareholders of Bharti Telecom to provide an exit route. The Company has thus initiated the process of capital reduction thereby providing an exit opportunity to such small shareholders".

"The price consideration of Rs 163.25 per equity shares (together with the dividend distribution tax of approximately Rs 33.55 per equity share payable by the Company, the total consideration amounts to Rs 196.80 per equity share) has been derived through a transparent valuation report by Ernst & Young, which takes into account the market price of BTL's investment in Airtel shares and BTL's borrowings. This is further supported by a fairness opinion from a SEBI registered merchant banker," Bharti spokesperson explained.

"While as per the statutory requirements, the proposal requires consent by way of a special resolution , keeping in view the high standards of governance we practice, BTL will proceed with the scheme provided consent of majority of the minority shareholders is also received," the spokesperson added.

Who is Arvind Gupta

Arvind Gupta came to light in 2016 when he had written a blog in which he exposed the alleged dealings between ICICI Bank CEO Chanda Kochhar's husband Deepak Kochhar and Videocon Group. Currently, the CBI, ED and Income Tax are probing the charges made in the first letter.

This year in May, he wrote a letter to Prime Minister Narendra Modi, saying the Ruias funded the NuPower -- founded by Deepak Kochhar and Videocon Chairman Venugopal Dhoot -- and its subsidiary through their son-in-law Nishant Kanodia and nephew Anirudh Bhuwalka during December 2010 to March 2012 by subscribing to compulsorily convertible preference shares and equity shares.

He again levelled fresh allegations of quid pro quo on ICICI Bank MD and CEO Chanda Kochhar in June, saying the ICICI Bank favoured Ruia brothers of Essar group for 'round-tripping' investments into Deepak Kochhar's NuPower Group - a firm which is at the centre of current Videocon loan probe.

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