Sundaram Clayton sells 4 shares via offer for sale route

MUMBAI: With only four shares to sell, doing it through the open market, and not a complicated offer for sale ( OFS), would be taking straight and narrow path. But TVS Group company Sundaram Clayton, the holding company of the Venu Srinivasan-run TVS Motor, chose the more convoluted way.

Yes, that’s right—it sold just four shares through this route on Thursday in order to meet regulator Sebi’s norm for a 25% minimum public float. What more, that offer was oversubscribed too, with 15 offers! The news of the four-share offer through the Offer for Sale route, complete with the appointment of the lead manager Axis Capital as sponsor, left stock pundits flummoxed through the morning.

“How ridiculous,” one of them wondered in an online forum. “Sebi has allowed the companies to meet the minimum public shareholding criteria by selling in open markets too. Where’s the need for an offer for sale?”

Actually, there was.

A representative of Sundaram Finance, which as one the promoters of Sundaram Clayton sold the four shares to the public, told ET that the open market option wasn’t available to it. This was corroborated by a Sundaram Clayton official. It all came down to this because of a small miscalculation in Sundaram Clayton’s attempts to shed some 5% of the stake to comply with Sebi’s norms.

The five routes available to them were a followon public offer, Offer for Sale, institutional private placement, bonus and rights issues. The regulator had set a deadline of June 3, which Sundaram Clayton missed, as did 100 other companies, and as a result faced penalties. Sundaram Clayton eventually completed the formalities earlier this week, or so it thought. It chose the institutional private placement route to place 12,64,501 shares to increase the public float to 25%. It managed only 24.999999%. Not good enough.

The company needed to shed four more shares. And the open market option was out of question, as it had already missed the deadline. In February, still well within the deadline, engineering major ABB was able to shed a s single share through the open market after Sebi gave it the go-ahead. Sundaram Clayton would have preferred the first option any day.