Markets regulator Securities Exchange Board of India, exempted state-owned Coal India from complying with regulations with regard to its proposed buyback of Shares.
What does Regulation Say ?
Buyback regulations prescribed by SEBI, imposes an obligation on the Company (Coal Indian in this case) to ensure that its promoters (Government in this case) do not deal in the shares of the company during the period from the date of passing the resolution (4th February’2019) of the board of directors till closing of the buyback offer.
Coal India had filed an application on February 12 with the Securities and Exchange Board of India (Sebi) seeking exemption from the strict enforcement of the buyback norms.
What was the potential violation ?
4,46,80,850 equity shares of Coal India were scheduled to be transferred to Asset Management Company. This asset management company manages the portfolio of Bharat 22 ETF. Additional offering period of Bharat 22 ETF opened and closed on 14.02.2019
Proposed transfer of equity shares is scheduled to occur during the period explicitly defined by SEBI.
Transfer of shares is taking place between date of passing the resolution of the board of directors approving the offer of buyback of securities of the company (i.e. February 4, 2019) and the closure of such offer.
On February 4, Coal India’s board had approved the buyback of 4.46 crore equity shares, representing about 9.86 per cent (stand alone basis) of aggregate of fully paid up equity capital at a price of Rs 235 per equity share for an aggregate consideration of Rs 1,050 crore.
The PSU in its application said that in the proposed buyback, 15 per cent of the number of equities will be reserved for small shareholders which will benefit larger number of such small shareholders.
The transfer of securities from the promoters to Bharat 22 ETF scheme being part of an ongoing disinvestment programme, I do not find it appropriate to stop the proposed buyback if it is otherwise for the benefit of the shareholders of Coal India.
Accordingly, it grants relaxation to Coal India from ensuring compliance with the the Buyback Regulations, 2018 in relation to the proposed buy back of 4,46,80,850 equity shares