Why The Paytm-Antfin Deal Won't Trigger An Open Offer
Vijay Shekhar Sharma's agreement with Alibaba group's affiliate entity Antfin (Netherlands) Holding B.V. will take the Paytm founder's stake to 19.42%.
Sharma currently holds 9.12% in Paytm. He's not categorised as a promoter, and post the Antfin deal, "there would be no change in the management or control of Paytm, since Sharma would continue as managing director and CEO, and the existing Board would continue as is. Paytm remains a professionally managed company with no identifiable promoter", the company said in an exchange filing.
He'll now acquire an additional 10.3% from Antfin via his 100% owned overseas entity: Resilient Asset Management B.V.
In exchange, Antfin will be issued optionally convertible debentures by Resilient in consideration for the transfer. The voting rights for the 10.3% will move to Resilient, but economic interest will continue to be with Antfin, the company said.
The deal between Sharma and Antfin will, however, not trigger an open offer.
It's clear enough, says Manshoor Nazki, capital markets partner at IndusLaw. "The trigger for an open offer is when an acquirer crosses the 25% threshold of shares or voting rights. So there will be no open offer requirement here, assuming there's no other way Sharma is acquiring control through the agreements with Antfin."
Sanjay Asher, senior partner with Crawford Bayley & Co., concurs. Even the creeping acquisition threshold won't get triggered. The Takeover Code says an acquirer, who currently holds 25% shares or voting rights, can't acquire another 5% of voting rights in a financial year, without making an open offer. "Since Sharma is not at 25%, this requirement too won't apply to him," Asher said.
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