American private equity (PE) fund General Atlantic’s planned acquisition of a majority stake in share registrar Karvy Computershare Pvt. Ltd has stalled, three people aware of the matter said.
Karvy Computershare is jointly owned by Hyderabad-based Karvy group, Australian share registry firm Computershare Ltd, and some other shareholders. In August, the two firms said General Atlantic will buy Computershare’s 50% stake, besides stakes held by some other shareholders, subject to regulatory approvals.
“The deal inked in August 2017 where the PE fund had offered $240 million for the majority stake in Karvy Computershare has not been cleared yet. The transaction has been held up due to regulatory clearances, but not called off,” said the first of the three people cited above, all of whom spoke on condition of anonymity.
An email sent to Karvy Computershare on Thursday and reminders did not elicit a response. General Atlantic emailed that it will not be able to comment.
Sebi didn’t respond to Mint’s email till press time.
Two people aware of the transaction said General Atlantic had planned to buy a total of 80% stake in Karvy Computershare. “The regulator has stopped the deal owing to the report of the R. Gandhi panel, which had recommended that one single unregulated entity cannot hold more than 15% in a registrar and transfer agent (RTA) and together, unregulated funds cannot hold more 49% in the RTA. The regulator considers RTAs as systemically important institutes and thus need enhanced governance and ownership standards,” said the second of the two people cited above.
In October, Sebi named a panel headed by former Reserve Bank of India (RBI) deputy governor R. Gandhi to study the regulations, ownership and governance norms for exchanges and depositories.
In April, Sebi asked the panel to also examine whether they can be characterized as market infrastructure institutes. The panel report submitted on 4 May said RTAs should either have a dispersed ownership or should be owned by regulated entities, or entities in the business of RTA. Regulated entities can own up to 100% in RTAs.
The regulator has invited comments from the public on the recommendations; if they are accepted, existing RTA ownerships may need to be changed over the next five years.
“Considering the likely impact of their services as they hold sensitive financial data of large number of investors, the committee recommends that the RTAs should have dispersed ownership and enhanced governance,” said the panel in its report.
“Sebi is of the view that ownerships of RTAs should not be concentrated in the hands of unregulated entities, which puts General Atlantic’s investment in Karvy Computershare in jeopardy. Another private equity fund is interested in buying a majority stake in another major RTA, but Sebi has not greenlighted that deal either,” said the third of three people cited above.
Source: Mint