Stock market regulator Sebi has imposed Rs five lakh penalty on AGI Greenpac for withholding crucial and share price moving information to the stock exchanges regarding its deal to acquire Hindustan National Glass (HNG), India's oldest and largest container glass-making company. A Sebi order says that AGI violated listing obligation and disclosure norms.
AGI is in the process of acquiring HNG and it had to seek permission from the Competition Commission of India (CCI) for the same. Sebi says that AGI Greenpac failed to disclose material developments on matters related to show cause notice issued by CCI to it, submission of modification to application filed by AGI to CCI and litigation related to the CCI order approving the proposed combination of AGI and HNG.
Between April and October 2023, the share price of AGI witnessed 236 per cent gains from a low of Rs 334 to a high of Rs 1089. It was mainly on the back of bouncy caused by CCI approval for AGI to acquire HNG, since the combination of the two companies was to make AGI the largest player in India's container glass industry. But CCI in its meeting held on February 9, 2023, formed a prima facie opinion that the proposed transaction was likely to cause an appreciable adverse effect on competition (AAEC) in relevant markets due to the combination of AGI and HNG.
Accordingly, a show cause notice was issued to AGI on February 10, 2023, in which the CCI asked as to why an investigation in respect of the proposed transaction should not be conducted. AGI hid this information from the public shareholders of the company. Later, when the CCI approval came for the deal, it was based on conditionalities where AGI had agreed to sell one of HNG's plants post-acquisition. Also, AGI did not inform shareholders about the modifications in its proposal. All these were material information that could have affected the share price of the company.
Before the SEBI order, Justice Justice Vikramajit Sen, the former chief judge of Karnataka High Court and judge of the Supreme Court had opined that AGI made partial and deceitful disclosure about the CCI approval.
"A mere perusal of the disclosures made by AGI to the Stock Exchanges show that it had to put itself in the best light, made a partial and indeed a deceitful disclosure about the CCI approval. I am of the view that information regarding CCI approval being contingent on the divestiture promised by AGI is an event that shall indubitably have a material and deleterious impact on the listed entity and; more likely than not, is certain to result in discontinuity or alteration of event or information already available publicly. Therefore, it would result in a significant market reaction when the
aforesaid omission is known to the public at a later stage," Justice Sen had said in his opinion.
AGI's resolution plan got "conditional" approval from the CCI in March 2023. There were complaints that AGI's acquisition of HNG would create a monopoly in the segment it operates yet the CCI gave its go-ahead on the "condition" that AGI had agreed to divest HNG's Rishikesh plant. It was the first merger filing approved "conditionally" by the CCI in a matter involving a debt resolution process under the doctrine of necessity. It was not known in the public what conditions were agreed upon.
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