Bharti-MTN open offer: SAT dismisses shareholder's plea

The Securities Appellate Tribunal on Friday 'dismissed' an appeal by a Bharti Airtel shareholder that challenged a Securities and Exchange Board of India guidance exempting South Africa's MTN from making an open offer to Bharti shareholders.

A bench comprising Justices N K Sodhi and Samar Ray observed that the appeal was 'premature' and dismissed it as 'infructious'.

Deepak Mehra, a shareholder of Bharti Airtel who holds about 100 shares aggregating to around Rs 40,000, sought to overturn an informal guidance issued by Sebi on June 22.

The market regulator had said that MTN need not make an open offer to Bharti Airtel shareholders in India as its shareholding in the Sunil Mittal-promoted firm would be through global depository reciepts.

Sebi said the open offer will only trigger once the GDRs, issued to MTN and its shareholders by Bharti Airtel are converted into local shares with voting rights.

Sodhi observed that a department of Sebi had only issued an informal guidance to Bharti Airtel on June 22, which was not binding on its board.

As per regulations, SAT can only overturn orders passed by Sebi.

"At the moment, no order has been passed. If Sebi does not do anything (pass an order), then we don't come in," Sodhi said.

The court observed that the bonafides of Mehra's appeal are 'suspect' and it was not inclined to entertain it as he had acquired shares of Bharti only on July 10, days after Sebi made the guidance public.

"The appellant, admittedly, acquired shares of Bharti only on July 10, maybe with a view to make himself eligible to file an appeal," Sodhi said.

Sebi had, on July 7, made public the guidance it gave to Bharti by posting it on the website.

"It (guidance) shall, therefore, be deemed to be noticed by all the market players," he said.

Bharti and MTN are currently in exclusive talks till August 31 to create a $23 billion merger in a cash and stock transaction.

If successful, the combined wireless group will have more than 200 million subscribers and a combined revenue of $20 billion.

Bharti Airtel had approached Sebi to grant an exemption to MTN from making an open offer in India following the deal.

The current takeover regulations call for an open offer for 20 per cent of a company's shares if a new entity buys 15 per cent of the company's shares.