Linde India Faces SEBI Directive Over Related-Party Transactions

Linde India, formerly known as BOC India, operates in the industrial, medical, and special gases sector. The company underwent a name change following its acquisition by Germany-based Linde AG in 2006, the global merger between Linde AG and Praxair Inc. in 2018 led to the formation of Linde Plc, with Linde India and Praxair India entering a joint venture to form Linde South Asia Services.

SEBI’s Order to Linde India

In a regulatory move, SEBI has directed Linde India Ltd. to address concerns regarding its related-party transactions with Praxair India Pvt. Ltd. and Linde South Asia Services Pvt. Ltd. This directive comes in the wake of shareholder complaints and a subsequent decision by the Securities Appellate Tribunal (SAT) on May 22, 2024 which overturned a previous interim order by SEBI.

Concerns Over Shareholder Rejection

SEBI’s member, Ashwani Bhatia, criticized Linde India for attempting to proceed with transactions that shareholders had previously voted down. Bhatia emphasized that these actions could not be justified merely by legal opinions obtained by the company, stressing the need for a valuation exercise to determine if shareholder approval was required.

Valuation Mandate

Following SAT’s decision, SEBI has instructed NSE to appoint a registered valuer to assess the valuation of transactions between Linde India and Praxair India, which also involves Linde South Asia Services under a joint venture agreement. Linde India is required to reimburse NSE for the valuation expenses incurred.

Future Compliance & Transparency

SEBI has mandated that Linde India test the materiality of future related-party transactions (RPTs) based on threshold norms. If the total value of RPTs surpasses the materiality threshold, shareholder approvals must be obtained. Additionally, the findings of the valuation report must be disclosed to Linde India’s audit committee and board of directors within two weeks, along with management comments. Following SEBI’s directive, Linde India’s stock rose over 5.7%, trading at Rs.8,333 today, reflecting investor optimism despite the regulatory scrutiny.

Conclusion: SEBI’s directive marks an important phase for Linde India in ensuring compliance with market norms, setting a precedent for corporate governance in the Indian market as this regulatory intervention brings out the importance of transparency and shareholder approval in related-party transactions.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.