Monday, 30th October 2017

E- paper

LIC checks into Leela row

The LIC has a 2.36 per cent stake in Hotel Leelaventure which translates into a valuation of around Rs 16.32 crore

By Sambit Saha in Calcutta
  • Published 25.04.19, 12:53 AM
  • Updated 25.04.19, 12:54 AM
  • 2 mins read
  •  
LIC made “a representation” to market regulator Sebi on Hotel Leelaventure’s proposed sale of four hotels and other assets to Canadian-based private equity player Brookfield (Shutterstock)

The Life Insurance Corporation of India, the nation’s largest life insurer and second-largest shareholder in ITC, appears to have thrown its weight behind the conglomerate in the battle against Hotel Leelaventure Ltd which operates luxury hotels in several cities.

The insurer has made “a representation” to market regulator Sebi on Hotel Leelaventure’s proposed sale of four hotels and other assets to Canadian-based private equity player Brookfield.

The regulator did not elaborate on the nature of the “representation” that the LIC had made. The LIC has a 2.36 per cent stake in Hotel Leelaventure which is held through its Future Growth Plus Fund, which translates into a valuation of around Rs 16.32 crore, according to the closing price of the company’s stock on Wednesday.

Earlier, ITC had strongly objected against the Rs 3,950-crore transaction through a representation to Sebi and then filed a petition in the National Company Law Tribunal alleging oppression of minority shareholders’ rights.

In a letter sent to Hotel Leelaventure on Tuesday, Sebi asked it to put the sale process on hold “till further directions”. Shareholders had time till Wednesday to approve the deal through postal ballot

On Wednesday, the NCLT directed ITC and Hotel Leelaventure to file affidavits while adjourning the hearing in the matter till June 18.

The LIC also holds a 16.19 per cent holding in ITC, making it the largest shareholder after British American Tobacco (BAT). The valuation of that holding roughly works out to Rs 60,820 crore, going by the closing price on the bourses.

ITC will welcome any show of support from the LIC as it falls short of the mandatory threshold of 10 per cent that is required to file a suit alleging oppression of minority shareholders’ rights.

ITC and its wholly owned investment subsidiary Russel Credit together hold around 8.72 per cent in Leela, falling short of the requirement which is mandated under Section 244 of the Companies Act 2013.

The Telegraph

In a landmark judgment recently, the National Company Law Appellate Tribunal had allowed Cyrus Mistry to file an application against Tata Sons despite holding less than 10 per cent of the capital.

The LIC, having made a representation before Sebi concerning the Leela-Brookfield deal, may aid ITC’s case before NCLT, Mumbai.

The grave charge that ITC has made in its petition is that there is a conflict of interest because JM Financial and Asset Reconstruction Company Ltd is advising Hotel Leelaventure on the sale while it holds a 26 per cent stake in the company.

JM Financial picked up the stake through a conversion of debt that was owed by the luxury hotel chain. Leela plans to use a majority of the proceeds from the sale to repay its debt to JM ARC.

ITC has said the Brookfield deal is a “related party transaction” as a significant shareholder (JM) would benefit from the deal and the rest of the minority shareholders, such as ITC and LIC, would be left with a company with no significant asset.

The Sebi letter to Leela noted that the regulator had already asked for clarifications on “alleged violation of related-party transaction” and the company has responded to that request.

“While these representations are being examined by Sebi, in view of the paucity of time involved and in the interest of investors in securities, you are as advised to ensure that none of the transactions proposed in the postal ballot notice dated March 18, 2019 are acted upon till further directions from Sebi,” the letter from Pradeep Ramakrishnan, general manager, compliance and monitoring division of Sebi, read.