Minority shareholder seeks Sebi intervention ahead of Hinduja Global merger with group co NXTGlobal

In a fresh salvo to the ongoing simmering tension between the minority shareholders of Global Solutions (HGS), the listed technology company of the Hinduja family and the promoters over the technology companies decision to buy Nxt Global, a loss making sister company, also listed, the former have reached out to the stock exchange regulator to intervene and prevent alleged mis-governance and protect the rights of minority shareholders.

The company has denied any wrong doing to Sebi as well as to the complaining shareholder saying these are baseless allegations. ET has reviewed the contents of the mails.

In a letter to Sebi end July, the minority shareholders have written seeking the regulator to prevent “mis-governance, protect the rights of shareholders, and ensure the compliance of listing obligations and other SEBI regulations.”

“Both Hinduja Global Solutions Limited and NXT Digital Limited are now controlled and substantially owned by Ashok P Hinduja,” the letter to Sebi chairperson from a minority shareholder said. “… Hinduja Global Solutions Limited, which has made $1.2 billion on sale of its healthcare business and did not reward the shareholders by way of liberal dividend, is now acquiring NXT Digital controlled by Ashok P Hinduja and will become a channel for diversion of funds for personal use and manipulation of markets. SEBI must therefore intervene immediately to prevent such malpractices in a Company where Board is either directly or indirectly employed by or controlled by Mr. Ashok P Hinduja,” the letter added.

Barings PE Asia bought the healthcare vertical last August.

The Hinduja family owns 67.13% in HGS as on June 2022 quarter data. It also owns 64.67% in NXT Digital. Additionally, group companies IndusInd International Holdings Ltd owns 6.51%, flagship

owns 1.25% and Communications Ltd owns another 1.77% but are classified as public shareholders. However, IndusInd International Holdings Ltd is classified as a promoter entity of IndusInd Bank, that is also backed by the Hinduja family. IndusInd Communication is another subsidiary of the Hinduja Group.

The shareholders of HGS and NXt Global are scheduled to meet on Friday to ratify the all stock deal after which it will go to NCLT for approval.

Hinduja Global in its response to Sebi on August 5 responded by saying, these statements, allegations and contentions raised are false, baseless, misconceived and completely untrue.”

The company claimed its board of directors had on January 14, 2022 reviewed potential opportunities and agreed in-principle to acquire digital business of NXT Digital Limited. Subsequently, after considering valuation reports of independent valuers — KPMG Valuation Services LLP and M/s. SSPA & Co., Chartered Accountants — the Audit Committee and the Board okayed the approval to acquire the digital business of NDL on February 17, 2022. The scheme was filed with NCLT, Mumbai Bench on June 9, 2022, after BSE and the NSE issued “no adverse observation letters,” HGS company secretary Narendra Singh told Sebi in that letter.

“The acquisition of said Business will enable the company to diversify and expand its presence in the fast growing digital, media and communication business in India,” the letter added. Apart from utilising part proceed towards proposed buyback of equity shares, HGS also plans to use some of the sale proceed for its organic/ inorganic growth.

Mails to HGS did not generate a response till press time.

Earlier this year, the $14 billion Hinduja Group had announced a restructuring of a few group entities. Step one involved listed NXTDigital merging its operations into Hinduja Global Solutions. NxtDigital deals with the the group’s digital and media businesses that include broadband, digital cable television, content syndication, and teleshopping. HGS is primarily a BPO that offers technology-related customer support to corporates overseas.

Upon regulatory approval, step two of the restructuring kicks in where in the unlisted Hinduja Leyland Finance (HLF), a non-banking lender and material subsidiary of Ashok Leyland, gets absorbed into NXT Digital, HLF, through a merger scheme. In January, HGS agreed to buy Nxt Global. Subsequently, in July the merger of the NBFC arm into NXT Digital was approved by the

board.

Allegations, shadow boxing
Old time Hinduja family watchers say, HGS could well become the new front for the ongoing fight between the families of four Hinduja brothers—Srichand, Gopichand, Prakash and Ashok. Ashok Hinduja, the youngest son of Parmanand Hinduja, the founder of the Hinduja Group, is the chairman emeritus of HGS but is not a board member. The two daughters of Srichand, Vinoo and Shanu, are fighting legal cases against their three paternal uncles across multiple jurisdiction.

In his July letter to Sebi, the minority shareholder alleged, that the malpractices in HGS began after September 2019, when 6 directors quit en mass. The three promotor directors were Vinoo S. Hinduja, Mr. Ramkrishan P. Hinduja and Shanu Hinduja while Ranjan Mohan, RP Chitale were among the independent director who quit.

The company refuted these allegations claiming, the two Independent Directors stepped down after completing their tenure effective July 3, 2019. Further, third independent director, resigned due to his professional and personal engagements effective September 2, 2019.

Questioning the “independence” of the new board members, the minority shareholder also alleged conflicts of interest as one independent director, Bhumika Batra is a lawyer at the law-firm that advises Ashok P Hinduja. Batra is a partner at Crawford Bayley & Co for 19 years. “Chairman, Mr. Y M Kale is associated with The Hinduja Group Limited, a company substantially owned and controlled by Mr. Ashok P Hinduja and another director, Mr. Sudhanshu Tripathi is an employee of Hinduja Limited.

The company has claimed all the board members of the Company are from diversified fields with varied and vast experience and is person of proven eminence in his/ her chosen field.”