The National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE) have frozen the shares of Patanjali Ayurved, a company owned by Baba Ramdev’s Patanjali group, for failing to meet the minimum public shareholding norms. Rule 19A(5) of the Securities Contracts (Regulation) Rules, 1957 mandates that a listed entity must have a minimum public shareholding (MPS) of 25 per cent. Patanjali Foods Ltd (PFL), formerly Ruchi Soya Industries, said that the decision would not affect the company’s financial position or operations.
PFL stated that discussions were underway to ensure that the company met the minimum public shareholding requirements. The promoters of Patanjali Ayurved and PFL have been working to take suitable steps to increase the public shareholding to the required levels. Due to the Covid-19 outbreak and the market conditions at that time, they were unable to increase the public shareholding to 10 per cent by June 18, 2021. In March 2022, PFL issued a follow-on public offering (FPO) and increased the MPS to 19.18 per cent. The company needs to increase its public shareholding by 5.82 per cent to reach the MPS.
PFL added that the promoters’ equity shares were already locked in as per the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 until April 2023 (one year from the date of listing, i.e., April 8, 2023). The freeze on the shares of Patanjali Ayurved and PFL by the stock exchanges will not have any impact on the company’s operations, according to the statement.
PFL was acquired by Patanjali Group under an insolvency resolution process after the resolution plan submitted by a consortium led by Patanjali Ayurved Ltd was approved by the National Company Law Tribunal (NCLT) in September 2019. After the equity shares were allotted pursuant to the implementation of the resolution plan approved by NCLT, the promoter and promoter group’s aggregate shareholding in PFL increased to 98.87 per cent of the total issued, paid up and subscribed equity share capital of the company.
As per rule 19A(5) of SCR Rules, if the public shareholding in a listed company falls below 25 per cent as a result of the implementation of the resolution plan approved under section 31 of Code, the company shall bring the public shareholding to 25 per cent within a maximum period of three years from the date of such fall. If the public shareholding falls below 10 per cent, the same shall be increased to at least 10 per cent within a maximum period of twelve months. As PFL’s public shareholding fell below 25 per cent and 10 per cent on December 18, 2019, it was required to increase the MPS by 25 per cent before December 18, 2022, which was not done.
The shares of 21 Patanjali group entities, including Patanjali Ayurved, Acharya Balkrishna, Patanjali Parivahan, and Patanjalu Gramudhyog Nayas, were frozen by the bourses, affecting 29,25,76,299 equity shares. PFL stated that the promoters were fully committed to achieving the MPS, and they were confident of achieving the mandatory MPS within the next few months.
