Future Corporate Resources, Kishore Biyani, and 13 others penalized by SEBI for failure to comply with open offer regulations

The Securities and Exchange Board of India (SEBI) has imposed a penalty of Rs. 20 lakh on Future Corporate Resources Pvt. Ltd. (FCRL), Kishore Biyani, and 13 other entities for not making a public announcement of an open offer to the shareholders of Praxis Home Retail. SEBI has asked them to pay the fine within 45 days.

SEBI found that FCRL, along with 14 other entities, failed to make a public announcement of an open offer as required under the Substantial Acquisition of Shares and Takeovers (SAST) Regulations. This was due to the increase in FCRL’s shareholding in Praxis following the conversion of compulsorily convertible debentures (CCDs). The increase in shareholding was from 47.43% to 53.13% between the quarter ended December 2019 and February 11, 2020.

SEBI noted that the 15 entities did not make a public announcement of the open offer, violating the provisions of SAST norms. SAST regulations were triggered in respect of the allotment of shares and the subsequent increase in the shareholding of FCRL. The rule mandates that the acquirer and persons acting in concert with it will be jointly and severally responsible for the fulfillment of the obligation.

SEBI’s obligation in respect of an open offer is to provide an exit option to the shareholders other than the promoters of the target company. Therefore, the penalty has been levied to ensure that the shareholders are not deprived of this right.

FCRL has been fined Rs. 10 lakh, and the remaining 14 entities have been fined Rs. 10 lakh together. These entities constitute the promoter and promoter group entities of Praxis before and after the allotment of the shares pursuant to the exercise of conversion of CCDs.

In conclusion, SEBI has taken strict action against FCRL, Kishore Biyani, and 13 other entities for not fulfilling their obligation of making a public announcement of an open offer to the shareholders of Praxis Home Retail. This penalty levied by SEBI serves as a reminder to all companies to comply with the SAST norms and fulfill their obligations towards the shareholders.