‘Mittals depriving us,’ feel BTL minority shareholders
7 Nov 2012 12:36 AM GMT
The minority shareholders of Bharti Telecom Ltd (BTL), the holding company that has a 45.32 per cent stake in the listed Bharti Tele-Ventures (BTVL), have alleged that its promoter Sunil Bharti Mittal is depriving them of their legitimate rights.
The Mittal family and SingTel are the primary shareholders of Bharti Telecom, which was delisted from the Bombay Stock Exchange (BSE) in October 1999, after an open tender by the company management at Rs 95 a share. Around 4,000 of them still hold 395,262 shares, which is equivalent to a 1.98 per cent stake in Bharti Telecom Ltd.
In May 2006 the company made a buyback offer at Rs 400 a share, valuing their 1.98 per cent stake at Rs 15.81 crore. This proposal was made nearly eight months after Vodafone Group Plc. the world’s biggest mobile phone services firm, bought one-tenth of Bharti Airtel via acquisition of a stake in the parent Bharti Telecom at Rs 6,700 crore, In 2009 SingTel entered into a conditional agreement with the Bharti Group to purchase an additional 730,000 shares in Bharti Telecom, whereby SingTel would make an estimated payment of between Rs 1,807.3 crore and Rs 3,008.4 crore ($641.3 million) for the purchase of additional shares of Bharti Telecom.
This tiered level of holding structure allowed Sunil Bharti Mittal to buy shares at Bharti Telecom cheaply, sell them dear and make huge profits without paying any taxes in India, as part of the holdings are via offshore entities in tax-free jurisdictions.
However, the promoters of Bharti Telecom have not been offering the minority shareholders the right price to exit while they are charging a premium to the market value of Bharti Airtel shares when they themselves want to sell. This leaves the Mittal family with a a highly profit-making arbitrage opportunity.
By virtue of its holding of 1,735,453,890 shares of Bharti Airtel, the company was eligible for a dividend of Rs 170 crore last year. However, Bharti Telecom used these funds to buy shares of Bharti Airtel Ltd from the open market. BTL has not declared any dividend so far.
At the last AGM of Bharti Telecom Ltd on 17 September, some minority shareholder offered their BTL shares at a 10 per cent discount to the current market price of Bharti Airtel Ltd. One BTL share represents about 80 shares of Bharti Airtel Ltd.
This offer was made as BTL would receive about Rs 170 crore as dividend from Bharti Airtel Ltd and about Rs 161 crore parked in short-term debt funds.
The minority shareholders say that Bharti Airtel got away with avoiding the open offer due to Sebi’s flexible application of the takeover norms. An appeal has been filed with SAT in this regard. Sebi is also examining complaints seeking rejection of the offer documents filed by telecom tower company Bharti Infratel Ltd for an IPO.
The Mittal family and SingTel are the primary shareholders of Bharti Telecom, which was delisted from the Bombay Stock Exchange (BSE) in October 1999, after an open tender by the company management at Rs 95 a share. Around 4,000 of them still hold 395,262 shares, which is equivalent to a 1.98 per cent stake in Bharti Telecom Ltd.
In May 2006 the company made a buyback offer at Rs 400 a share, valuing their 1.98 per cent stake at Rs 15.81 crore. This proposal was made nearly eight months after Vodafone Group Plc. the world’s biggest mobile phone services firm, bought one-tenth of Bharti Airtel via acquisition of a stake in the parent Bharti Telecom at Rs 6,700 crore, In 2009 SingTel entered into a conditional agreement with the Bharti Group to purchase an additional 730,000 shares in Bharti Telecom, whereby SingTel would make an estimated payment of between Rs 1,807.3 crore and Rs 3,008.4 crore ($641.3 million) for the purchase of additional shares of Bharti Telecom.
This tiered level of holding structure allowed Sunil Bharti Mittal to buy shares at Bharti Telecom cheaply, sell them dear and make huge profits without paying any taxes in India, as part of the holdings are via offshore entities in tax-free jurisdictions.
However, the promoters of Bharti Telecom have not been offering the minority shareholders the right price to exit while they are charging a premium to the market value of Bharti Airtel shares when they themselves want to sell. This leaves the Mittal family with a a highly profit-making arbitrage opportunity.
By virtue of its holding of 1,735,453,890 shares of Bharti Airtel, the company was eligible for a dividend of Rs 170 crore last year. However, Bharti Telecom used these funds to buy shares of Bharti Airtel Ltd from the open market. BTL has not declared any dividend so far.
At the last AGM of Bharti Telecom Ltd on 17 September, some minority shareholder offered their BTL shares at a 10 per cent discount to the current market price of Bharti Airtel Ltd. One BTL share represents about 80 shares of Bharti Airtel Ltd.
This offer was made as BTL would receive about Rs 170 crore as dividend from Bharti Airtel Ltd and about Rs 161 crore parked in short-term debt funds.
The minority shareholders say that Bharti Airtel got away with avoiding the open offer due to Sebi’s flexible application of the takeover norms. An appeal has been filed with SAT in this regard. Sebi is also examining complaints seeking rejection of the offer documents filed by telecom tower company Bharti Infratel Ltd for an IPO.
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