Minority Interest

India’s capital markets were given a stark reminder that corporate governance often functions more as a guideline than a consistently enforced standard. In the high-profile delisting of ICICI Securities by parent ICICI Bank, the Securities and Exchange Board of India (SEBI) flagged multiple lapses in shareholder engagement, sparking a broader conversation about minority rights and transparency in India Inc.

Key Highlights

• SEBI issued a formal warning to ICICI Bank for inappropriate shareholder outreach during the ICICI Securities delisting process.
• Minority shareholders raised concerns over coercion, valuation, and voting irregularities.
• The share swap transaction was valued at ₹5,000 crore (~$622 million), affecting over 120,000 investors.
• Despite objections, the delisting was approved by NCLT and upheld by NCLAT.
• The case reignited scrutiny of corporate governance norms in delisting processes.

Timeline of Events

• June 2023: ICICI Bank proposes to delist ICICI Securities via a share swap offer (67 ICICI Bank shares for every 100 ICICI Securities shares).
• March 28, 2024: Shareholders vote in favour of the delisting with 71.9% approval.
• June 2024: SEBI issues a cautionary letter to ICICI Bank for inappropriate conduct.
• August 2024: NCLT clears the merger despite multiple objections.
• March 2025: NCLAT dismisses appeals and permits the delisting.

What Led to the Controversy?

ICICI Bank, holding approximately 75% in ICICI Securities, sought to delist its brokerage unit through a share swap. Although the parent company framed this as a strategic consolidation, many minority shareholders questioned the fairness of the swap ratio and the transparency of the process.

Investors argued that the valuation did not reflect ICICI Securities’ standalone profitability and future growth potential. The absence of a reverse book-building mechanism which typically allows shareholders to set a market-driven price for buybacks or delisting further fueled doubts.

The situation intensified when minority investors reported unsolicited calls from ICICI Bank representatives urging them to vote in favor of the deal and asking for screenshots as evidence, sparking allegations of coercion.

SEBI’s Intervention and Warning

SEBI, India’s primary market regulator, stepped in after multiple shareholder complaints. In a formal warning issued in June 2024, SEBI stated:

“The outreach programme carried out by ICICI Bank to its shareholders amounts to a serious lapse in corporate governance. Such conduct compromises the independence of shareholder decision-making.”
Summary of SEBI Cautionary Letter, June 2024

SEBI’s warning did not include a monetary penalty but mandated an internal investigation by ICICI Bank and urged corrective measures to prevent recurrence.

ICICI Bank’s impunity

Following SEBI’s letter, ICICI Bank defended its actions:

“We are of the considered view that the proposed scheme is in the best interests of shareholders of both ICICI Securities and ICICI Bank. Consequently, we felt it was important to reach out to retail shareholders to facilitate a considered outcome of the vote.” ICICI Securities official statement, June 2024

Despite the public assurance, many shareholders remained unconvinced about the fairness and transparency of the process.

Voices from the Minority Shareholders

Minority shareholders like Manu Rishi Guptha and institutions such as Quantum Mutual Fund challenged the delisting legally. They cited coercive outreach, undervaluation, and lack of price discovery mechanisms as critical issues.

“This case highlights a dangerous trend where promoters leverage their majority to marginalize minority investors, often using questionable tactics,” said Guptha, a petitioner.
– Investor and petitioner

The NCLT, however, approved the delisting in August 2024, with NCLAT affirming this decision in March 2025, effectively closing the judicial window.

Minority Shareholders are just pushovers?

Minority shareholders are investors holding less than 50% of a company’s shares, often lacking control over decisions but still exposed to risks stemming from promoter actions. Protecting minority investors is vital for healthy capital markets, as their confidence encourages participation and liquidity.

In India, minority shareholders’ rights include voting on major corporate actions like mergers, de-listings, and takeovers. However, when governance is weak, and promoters exert disproportionate influence, minority interests’ risk being compromised.

How Does This Incident Impact Minority Finance?

The ICICI Securities case exposes vulnerabilities in minority shareholder protections:

• Valuation risks: Without independent or market-driven pricing, minority shareholders have been forced to accept undervalued offers.
• Information asymmetry: Direct calls and communication from promoters can pressure shareholders without full disclosure or balanced perspectives.
• Limited legal recourse: Prolonged legal battles with uncertain outcomes discourage minority shareholders from challenging corporate decisions.
• Regulatory gaps: Current frameworks allow promoters to use merger routes to bypass fair price discovery mechanisms.

Shortchanging on a large scale.

The ₹5,000 crore (~$622 million) transaction impacted over 120,000 minority investors, retail and institutional whose shares were bought out or converted. Although the delisting did not trigger market-wide disruptions, such episodes erode investor trust, a critical component for capital market growth.

Further, governance lapses can:

• Reduce foreign and domestic institutional investor participation.
• Increase cost of capital for listed companies.
• Create systemic risks if unchecked promoter dominance proliferates.

The Tactics Used- A Closer Look

The controversy highlights specific tactics employed during the delisting:

Tactic	Description
Direct Outreach	Shareholders received unsolicited calls encouraging positive votes
Proof of Voting Requests	Some investors were asked to send screenshots of their voting confirmation
Valuation Avoidance	No reverse book-building or open tender to establish fair market price
Legal Structuring	Merger route used to bypass stricter takeover/delisting price norms

Torch bearers of corporate governance flout rules with impunity; lesser known corporates are fly by nights.

The ICICI Securities delisting episode exposes the fragile state of corporate governance in India’s capital markets, particularly the vulnerability of minority shareholders when promoters wield disproportionate power. Despite existing legal frameworks, the incident highlights gaps in enforcement, transparency, and fair valuation practices. SEBI’s warning to ICICI Bank signals regulatory awareness but also underscores the need for more robust mechanisms to prevent coercive tactics and ensure genuine shareholder consent.

For minority investors, the case serves as a cautionary tale about the risks embedded in delisting and merger processes, emphasizing the importance of vigilance, informed decision-making, and collective action. As India’s markets mature, strengthening corporate governance and protecting minority finance must be priorities to foster trust and sustainable growth. Ultimately, this controversy reaffirms a hard truth: in corporate governance, there is no omnipotent guardian only a continuous struggle for fairness that requires constant regulatory oversight, shareholder empowerment, and ethical business conduct.