Idea Cellular and Vodafone India's $23 billion worth merger has now received conditional approval from the Securities and Exchange Board of India (Sebi). The merger will be subject to the regulator's ongoing probe and approvals from public shareholders and the National Company Law Tribunal (NCLT).
A report from Economic Times says that SEBI stated that all its conditions must be placed before the NCLT while seeking for the latter's approval. "In its no-objection letter on the scheme of arrangement between Vodafone Mobile Services, Vodafone India, Idea, their shareholders and creditors, Sebi said all its conditions must be placed before the NCLT while seeking the latter's approval, " says the report.
A Vodafone spokesperson also said the publication as "Vodafone welcomes the Sebi approval." "The regulator said Idea has given a voluntary undertaking to Sebi that it will not dispose of shares that were purchased by one of its promoters before the merger announcement, till further directions from Sebi," the report further added.
"... Any liability eventually held to be valid against the purchases (Idea Cellular Ltd) shall be borne by them. Idea Cellular Ltd (ICL) has also submitted a voluntary undertaking stating inter-alia, that it will comply with the directions of Sebi in respect of the ongoing examination of the purchase of shares by purchasers before the announcement of the proposed scheme. ICL has also undertaken that any liability eventually held to be valid against it shall be borne by ICL," SEBI noted in the letter.
SEBI also says it had received a complaint on Idea Cellular, which claimed that one of the promoters of Idea had purchased 0.23% of Idea shares before the announcement of the merger. This, in turn, leads that to a violation of security laws. "Validity of the observation letter shall be six months from August 4, 2017, within which the scheme shall be submitted to the NCLT," stock exchanges said.
"Sebi said the complaint also alleged a violation of takeover regulations as the shareholding of Idea Cellular would increase from 21% to 26% pursuant to the instant scheme, triggering an open offer obligation," the report further adds.
Vodafone and Idea Cellular recently received a nod from the Competition Commission of India (CCI). Vodafone and Idea are on the verge of becoming India's largest telecom operator with over 400 million subscribers combinedly and 41% market share.