If we keep the stock manipulation aside, the rest of this is perfectly legal and common. It’s basically a reverse IPO where a private company acquires a public company to list itself. This way, they bypass the scrutiny for IPO listing and can list on the mainboard instead of SME.
Let’s take this company for example. Sword & Shield Pharma Limited was acquired by Praveg Communications Limited in 2019.
They increased their shareholding by a scheme of amalgamation with these terms. “In accordance with the Scheme, upon the Scheme becoming effective and in consideration of amalgamation, Praveg Communications (India) limited shall issue and allot 75 (Seventy Five) fully paid up Equity Shares of Rs.10/- each for every 1 (One) Equity Share of Rs.10/- each fully paid up, to the equity shareholders of Transferor Company i.e. Praveg Communications Limited, whose name appear in the register of members as on the ‘Record Date’ i.e. March 6, 2020.”
They wanted to enter into the real estate and energy business.
“At present, the Company is engaged in the business of Exhibitions and Events Management. The company has various plans for expansion of its business operations from the present level and accordingly, it is proposed to start the business of Real Estate and Energy Business. In order to commence the same, it is proposed to alter the Main objects clause of the Memorandum of Association (MOA).”
They liquidated some of their holdings to buy Jhaveri Credit.They may be starting the real estate or energy business with Jhaveri Credit after acquisition. Since this company is not an acquirer, they have no obligation to report to exchange regarding this.
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