The cancellation of the ₹110 crore deal between Vascon Engineers and a Lodha Group entity has come under the scanner of the Securities and Exchange Board of India (SEBI).
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According to people familiar with the development, the capital market regulator is examining if there were instances of insider trading, fraud or change in control after the deal was announced in April. Incidentally, the stock price of Vascon Engineers rose 35% in a fortnight before the announcement in April to touch a high of ₹55. After the announcement, however, it has largely remained subdued, never crossing ₹60 mark.
Further, the last three trading sessions saw the stock price tumbling by almost 25% as the company announced that the deal has been cancelled.
“Due to certain differences between the company with the proposed investors, both parties have decided to terminate the arrangement. Accordingly, the company has cancelled the proposed preferential allotment of CCDs (compulsorily convertible debentures) to the proposed investors,” according to a statement issued by Vascon Engineers.
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Change in control
Apart from the stock price movement, the regulatory probe has also been triggered by the fact that some of the former employees of Lodha Group have joined the company in the recent past.
This, say sources, has led SEBI to examine if there was any change in the control of the company.
Under SEBI’s Takeover Code, any change in control of the company necessitates an open offer by the acquirer.
“The company held an investor call on Monday (June 12) and a lot of queries were raised by investors. Questions were asked about former employees of Lodha group being appointed as senior directors and their role in the company. Plus the manner in which the stock price has moved since April has alerted the regulator,” said a person familiar with the matter. He did not wish to be named as the matter is under investigation. Vascon Engineers, a publicly-listed company with a market capitalisation of ₹700 crore, is among the top real estate developers of Pune having developed IT parks, malls, multiplexes and residential projects.
“We have made our announcement in compliance with applicable law. We cannot say anything more to anyone selectively.
We are fully in compliance with all applicable laws,” said M. Krishnamurthi, chief corporate affairs, in response to a query emailed by The Hindu.
Shares gain
On Thursday, shares of Vascon gained 2.76% to close at ₹42.85. The deal between the company and Manan Finserve — the Lodha group entity — entitled the investor to convert the CCDs into equity at a price of at least ₹45.60. The debentures were to be compulsorily converted into equity shares after 18 months — earlier if the investor wished to — and carried a coupon rate of 17%, as per the company's statement to the stock exchanges.
The deal was structured in a manner that would have given the investors a stake of 12.58% in the company post the conversion of the debentures into equity.
Latest data
The latest shareholding data shows that promoters hold a little over 36% stake while public shareholders holding a stake in excess of 1% include market veteran Vallabh Bhansali and his nephew Akash Bhansali. Collectively, the duo hold hold 5.66% in the company.