Even as the crisis at the National Spot Exchange (NSEL) remains unresolved, fears of any systemic fallout on the equity markets have been put to rest by the Securities & Exchange Board of India (Sebi).
Speaking to the FE, Sebi chief UK Sinha said the equity markets are insulated from the crisis, adding that the situation is being closely monitored. “We are reviewing the situation regularly and things are normal. Margins are nowhere near stress level and are at normal levels,” said Sinha, adding that even if some of the brokers and traders were trading on the commodity markets, it was being done through a separate legal entity. “In that sense, there is ringfencing,” said Sinha
The Sebi chief, who has his hands full with issues ranging from the fallout of NSEL, determining whether minority shareholders’ rights were compromised in the Holcim-Ambuja-ACC deal and giving its final view on the Jet-Etihad deal, is reluctant to comment on specific deals, but assures that a consistent approach will be followed in each of the cases.
Sebi is currently examining the multi-layered deal under which Holcim will increase its stake in Ambuja Cements to over 61% and in turn have Ambuja acquire Holcim’s 50% stake in ACC. The deal has faced ire of proxy advisory firms, who advise minority shareholders on voting on specific resolutions, and feel that shareholder interest has been compromised in this case. “If we find that decisions have been taken or are proposed to be taken against the interests of the minority shareholders, we have certain instruments in our hand to deal with it and we will do that,” Sinha noted.
Sebi will look at whether an independent valuation had been conducted ahead of the deal and ensure that all procedures laid down for voting on such resolutions are followed. Under recently adjusted procedures, related parties are not allowed to participate in the voting on a specific resolutions. “The manner in which voting is to be conducted is giving an overwhelming advantage to the minority shareholders. But even after that, if minority shareholders vote along with the promoters, it is fine with me,” said Sinha.
With talk that the Jet-Etihad deal would finally be closed by month-end, Sinha reiterated that the capital market regulator has to be convinced that the deal does not breach it's definitions of “control”, which would then trigger an open offer. Sinha, however, stopped short of saying whether the revised proposal has been sent back to Sebi for a final review.