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Sebi move may hamper Damani bid for VST

Janaki Krishnan & Ashwin Punnen

The disclosures sought by Securities and Exchange Board of India in the VST open offer case are likely to put a spanner in the Damani brothers take-over attempt.

This is because the Damani brothers are under investigation by various enforcement agencies in the current market manipulation case.

Sebi has invoked the 'persons acting in concert clause' under the Takeover Code, which requires companies making the offer not only to make full disclosures regarding their own activities and financial performance, but also about their promoters and holding company.

While the Damani brothers - Radhakishan S Damani and Gopikishan S Damani - have made the offer through Brightstar, ITC Ltd, the other contender for the stake in VST Industries, has made its open offer through Russel Credit Ltd, which is a wholly owned subsidiary of ITC.

Here also under the persons acting in concert clause, Russel Credit has to make disclosures not only about itself but also about ITC Ltd. Full-time member on the Sebi board J R Varma explained that the disclosures were necessary since one of the parties in the open offer was in the same line of business as the company being acquired - that is, tobacco.

"If it had been a totally unrelated business, then the disclosures might not have been so necessary," he explained.

Full disclosures by Brightstar would also include the ongoing investigations and other details of the activities of the Damani brothers.

When asked whether this would impinge in any way on their open offer for VST, Varma said that anything could happen. The investors as well as VST had a right to know the credentials of who they were being acquired by.

"If an association with ITC has the ability of enhancing VST's prospects then that is certainly a factor in their favour," he pointed out.So far, he said, the open offer was progressing along smooth lines, but a decision would be taken only when both the parties had fully disclosed all the information, which was required by them under the regulations.

Incidentally, if neither of the entities want to disclose details of their parental holding then the onus is on them to prove they are not "acting in concert."

Brightstar had made an open offer for a 20 per cent stake in VST, which is a subsidiary of ITC Ltd, at a price of Rs 112 per share. Russel Credit then made a counter offer at Rs 115 per share for a 20 per cent stake in VST.

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