NCLAT upholds ICICI Securities delisting, dismisses shareholders challenge

The companies appeal court on Monday upheld the delisting of ICICI Securities Ltd from the stock exchanges, rejecting challenges by shareholders Quantum Mutual Fund and an individual investor.

“All appeals dismissed,” remarked the Delhi bench of the National Company Law Appellate Tribunal (NCLAT) while pronouncing its judgment.

Quantum Mutual Fund had approached NCLAT in September to oppose ICICI Securities’ delisting, citing concerns over its impact on minority shareholders. Earlier, the Ahmedabad bench of the National Company Law Tribunal (NCLT) had approved the delisting, dismissing the fund’s objections.

ICICI Securities in June 2023 announced its plan to delist and merge with its parent company, ICICI Bank Ltd. Shareholders approved the plan in March 2024, with 72% of minority shareholders voting in its favour. 

As part of the delisting, ICICI Securities is to become a wholly owned subsidiary of ICICI Bank. Under the proposed share-swap arrangement, shareholders were to receive 67 shares of ICICI Bank for every 100 shares of ICICI Securities.

However, shareholders Quantum Mutual Fund and Manu Rishi Gupta opposed the move in separate petitions in the NCLT, arguing that the swap ratio would hurt the interests of minority shareholders. 

Gupta and Quantum Mutual Fund own 0.002% and 0.08%, respectively, of ICICI Securities’ paid-up equity share capital.

ICICI Securities contested their applications, stating that the petitioners had no legal standing in the matter. Section 230(4) of the Companies Act states that any objection to a company’s decision can only be made by investors holding not less than 10% of the shareholding.

NCLT upheld the ICICI Securities’ delisting in August 2024, prompting Gupta and Quantum Mutual Fund to challenge the decision in NCLAT.

The shareholders’ concerns

Concerns over the stock’s actual valuation were raised, as ICICI Securities’ share price at the time of the delisting announcement was slightly above its initial public offering (IPO) price of ₹520. (Around noon on Monday, ICICI Securities shares were up about 1% at ₹804.15 apiece.)

Shareholders highlighted issues regarding the depressed valuation and questioned the fairness of the share-swap ratio, especially given the stock’s potential.

During the NCLAT hearing, Quantum Mutual Fund alleged that the Securities and Exchange Board of India (Sebi) was ‘hand in glove’ with the financial broking firm regarding its delisting. ICICI Securities contested the allegations after the market regulator was made a party in the case.

Citing a Sebi letter, the senior counsel for the minority shareholder told NCLAT that the markets regulator had granted ICICI Bank an exemption to provide certain flexibility on Regulation 37 of Sebi’s Delisting Regulations. 

Per the letter, Sebi allowed ICICI Bank to delist its financial broking arm even though the listed holding company and listed subsidiary were not in the same line of business, as required under Regulation 37.

The minority shareholders also cited an instance in which the markets regulator had issued a warning to ICICI Bank regarding its outreach to investors about the delisting of ICICI Securities.

They added that, according to Sebi, ICICI Bank had submitted that the outreach was only meant to raise awareness about the scheme and maximize shareholders’ participation. However, based on an inspection of investor complaints, the regulator observed that some bank officials had exceeded their remit by making repeated calls and asking for screenshots of votes.

However, NCLAT rejected all the claims and upheld the delisting.