Clarification on frezzing of promoter's shareholding in Patanjali foods limited by stock exchanges

Clarification on frezzing of promoter's shareholding in Patanjali foods limited by stock exchanges

The Company was acquired by Patanjali Group pursuant to the approval of resolution plan submitted by a consortium led by Patanjali Ayurved Limited

Staff ReporterUpdated: Thursday, March 16, 2023, 02:06 PM IST
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Indore (Madhya Pradesh): Patanjali Foods Limited (formerly known as Ruchi Soya Industries Limited) ("Company”) went into corporate insolvency resolution process (“CIRP”) with effect from December 15, 2017 as per the order dated December 15, 2017 passed by Honorable National Company Law Tribunal, Mumbai Bench (“Hon’ble NCLT”) under Insolvency and Bankruptcy Code, 2016 ("Code”).

The Company was acquired by Patanjali Group pursuant to the approval of resolution plan submitted by a consortium led by Patanjali Ayurved Limited by Honorable NCLT vide its order dated July 24, 2019 read with Order dated September 4, 2019 and the same was implemented with effect from December 18, 2019. Owing to the allotment of the equity shares made pursuant to the implementation of resolution plan as duly approved by the Hon’ble NCLT, the aggregate shareholding of the promoter and promoter group of the Company increased to 98.87% of the total issued, paid up and subscribed equity share capital of the Company.

In terms of regulation 38 of SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”) a listed entity is mandatorily required to comply with the minimum public shareholding(“MPS”) requirements as specified in rule 19(2) and rule 19A of the Securities Contracts (Regulation) Rules, 1957 (“SCR Rules”).

As per rule 19A(5) of SCR Rules where as a result of implementation of the resolution plan approved under section 31 of Code, public shareholding in a listed company falls below twenty-five per cent-then such company shall bring the public shareholding to twenty-five per cent within a maximum period of three years from the date of such fall and if the public shareholding falls below ten per cent then the same shall be increased to at least ten per cent, within a maximum period of twelve months (earlier “eighteen months”time-period was their when the Company was preparing to come up with further public offer so as to increase the public shareholding and the said time line“eighteen months” was substituted with “twelve months” w.e.f. 18.06.2021) from the date of such fall.

Given that the public shareholding of the Company fell below 25% and 10% on December 18, 2019 as a result of implementation of the resolution plan approved under the Code, MPS in the Company was required to be increased pursuant to Rule 19A (5) of SCR Rules:

(i) within 18 months from the date of fall in public shareholding to below ten per cent, to increase the public shareholding to at least ten per cent i.e. on or before June 18, 2021[1] (being 18 months from December 18, 2019); and

(ii) within 3 years from the date of fall in public shareholding to below twenty-five per cent, to increase the public shareholding to at least twenty-five per cent i.e. on or before December 18, 2022 (being 3 years from December 18, 2019).

The Promoters were trying to take suitable steps as to achieve the MPS in timely a manner and owing to the COVID outbreak and market conditions prevailing at that point of time, the public shareholding could not be brought up to ten percent by June 18, 2021. However, the Company came out with the further public offer of equity shares of Rs. 2/- each at a premium of Rs. 648/- per share aggregating to Rs. 4,300 Crores in the month of March 2022 and allotted 6,61,53,846 equity shares to public (non-promoter entities) by which the public shareholding increased to 19.18%.Since, at present, 19.18% shares in the Company are held by public shareholders, the Company is required to further increase its public shareholding by 5.82% to achieve the MPS. The public shareholders have been benefited and despite the prevailing adverse market conditions, the price of the scrip is being quote above the issue price of the shares by the Company.

While it was under discussion to adopt the appropriate means and methods for increasing the public shareholding, in the meantime, the Stock Exchanges have freeze the Promoters’ shareholding in the Company as per as per SEBI Circular No. SEBI Circular No. CFD/CMD/CIR/P/2017/115 dated October 10, 2017.

In respect of action taken by the Stock Exchanges as to freeze the promoter’s shareholding in the Company, it is hereby clarified that:

a) The Promoters’ shares are already under lock-in as per SEBI guidelines till April 2023 (one year from date of listing i.e. April 08, 2023), and instant actions of Stock Exchanges does not appear to have negative impact on the functioning of the Company;

b) We do not foresee any adverse or negative impact on the financials position of the Company owing to the instant freeze of Promoters’ shareholding by the Stock Exchanges;

c) The Promoters are fully committed to the mandatory compliance of achieving MPS and are exploring various ways and means to achieve the MPS and simultaneously ensuring that interest of the public shareholders is appropriately protected. 

d) The Promoters are and shall always be committed to lead the Company as one of the leading FMCG players with the sustainable growth.

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