The Securities Exchange Board of India (SEBI) has exempted the Government of India (GoI) from making an open offer to the shareholders of Vodafone Idea Limited (VIL) pursuant to the proposed acquisition of a 33% stake in the telco. SEBI said that the GoI could skip this process, and this means that the equity conversion process for the company has just become easier and will happen faster too.
For the unaware, whenever an entity tries to acquire 25% or more of a publicly listed company in India, it has to give shareholders of the company an open offer to sell their shares and exit the business. This is to keep the interest of the shareholders intact. But this time around, SEBI said that GoI wouldn’t have to make such an offer to the shareholders of the company meaning the process of equity conversion would get done faster. But is it a fair thing for the shareholders of the company? Well, SEBI did give a reason behind the move.
SEBI Believes GoI’s Equity is in the Interest of the Shareholders
Note that if the GoI didn’t take equity from Vi, it would mean a significant debt added on the shoulders of the telco. In 2021, to save the telecom sector from facing further liquidity issues, GoI had offered an option to the telcos to convert their interest dues on the spectrum as equity for the central government.
Vi exercised the right and is now giving around 33% of the company to the government. So why did the shareholders not get an option to sell their shares in an open offer to the government?
Well, the concept of an open offer was made to ensure that if the new acquirer could disturb the business in any way, the shareholders should be able to exit before they suffer anticipated losses.
In this case, the GoI is only going to act as a silent entity. GoI isn’t going to be in control in any manner of the management or the board of the company. Thus, GoI’s shareholding will be treated in the same manner as the public. Thus, according to PTI, there is no need for an open offer, said SEBI.