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`Violation of listing agreement' — SEBI tells Parry Agro not to proceed with buyback

C.R. Sukumar

Parry Agro is also said to have disclosed in the public announcement and the draft offer document that the company intended to delist the equity shares from all the stock exchanges on completion of the buyback.

HYDERABAD, June 24

ALLEGING violation of listing agreement by Parry Agro Industries Ltd (PAIL), part of the Chennai-based Rs 3,800-crore Murugappa group, on the issue pertaining to buyback of shares, the capital market regulator has directed the company not to proceed with its proposed buyback scheme.

Earlier, during the fourth quarter of last fiscal, PAIL proposed to buyback 8.67 lakh fully paid-up shares of Rs 10 each at a price not exceeding Rs 70 per share.

The company announced the buyback offer to its shareholders on January 31.

According to the Deputy General Manager of Securities and Exchange Board of India (SEBI), Ms Neelam Bhardwaj, the regulator observed from the draft letter of offer filed by PAIL that the company was "proposing to buyback the entire shareholding of the company held by non-promoters.''

PAIL is also said to have disclosed in the public announcement and the draft offer document that the company intended to delist the equity shares from all the stock exchanges on completion of the buyback, subject to the requisite statutory compliance.

Drawing the attention of the company to the sub-clause (iii) of Clause 40A (conditions for continuous listing) of the listing agreement, the SEBI official said the proposed buyback of shares by the company resulted in violation of the listing agreement.

The cited sub-clause says: "The company agrees that it shall not make preferential allotment or an offer to buy back its securities, if such allotment or offer results in reducing the non-promoter holding below the limit of public shareholding specified under the SEBI (Disclosure and Investor Protection) Guidelines, as applicable at the time of initial listing or the limit specified in sub-clause (ii) for the existing listed company, as the case may be.''

SEBI is of the view that the proposed buyback of Parry Agro with an intention to delist the equity shares from all the stock exchanges amounts to violation of the above sub-clause since the non-promoter shareholding in PAIL would be reduced below the level of public shareholding at the time of initial listing of the company.

Submitting to the stock exchanges SEBI contention and its directive to stop the proposed buyback, the Company Secretary of PAIL, Mr G. Swaminathan, said: "The company is in the process of seeking the opinion of legal counsel for the course of action available to it in respect of the same.''

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