sebi:CO/155/CRD/02/2005

SEBI · SEBI · 1976-06-12 · G. N. Bajpai, Chairman

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Facts / Headnote

Show cause notice proceedings; order text provided is truncated before final directions/penalty

Provisions invoked

• s. 189

Regulations

• Reg. 7
• Reg. 6
• Reg. 44
• Reg. 11
• Reg. 2(1)(c)
• Reg. 199
• Reg. 2(1)
• Reg. 12
• Reg. 8
• Reg. 14
• Reg. 14(1)
• Reg. 45
• Reg. 2
• Reg. 10
• Reg. 14(3)
• Reg. 1
• Reg. 22
• Reg. 11(1)
• Reg. 3(1)
• Reg. 3(4)

Parties

• Hindalco Industries Ltd
• Pilani Investments Corporation Ltd
• Gwalior Rayon Silk Mfg. (Wvg.) Co. Ltd

Holding

The order (as provided, truncated) finds prima facie that the Acquirers' acquisition of an additional 31.23% of shares via the rights issue, which reduced BSIDCL's holding below 26% and thereby changed the right to control management, was not exempt under Regulation 3(1)(b) and triggered Regulation 11(1) and Regulation 12, requiring a public announcement under Regulation 14(1) and 14(3).

Full text

Home » Enforcement » Orders » Orders of Chairman/Members Enforcement Enforcement▼ Order against Bihar Caustic & Chemicals Ltd Feb 18, 2005 | Orders : Orders of Chairman/Members CO/155/CRD/02/2005 SECURITIES AND EXCHANGE BOARD OF INDIA

(SAST) REGULATIONS 1997 TO HINDALCO INDUSTRIES LTD. AND PILANI INVESTMENTS CORPORATION LTD. 1.0 BACKGROUND 1.1 Bihar Caustic and Chemicals Ltd (hereinafter referred to as Target Company), incorporated on July 20, 1976, is a company having its shares listed on BSE, CSE and DSE. Bihar State Industrial Development Corporation Ltd (BSIDCL) and Birla group companies viz., Hindalco Industries Ltd (HIL) along with Pilani Investments Corporation Ltd. (hereinafter referred to as the Acquirers) and Grasim promoted the Target Company. The Target Company was controlled by the aforesaid parties as per their Joint Venture agreement (J V Agreement) dated June 12, 1976. The J V agreement governed the rights of the Acquirers and BSIDCL in respect of the management of the Target Company. Originally, BSIDCL and Birla Group companies were holding 26% and 25% respectively. 1.2 The JV agreement was renewed / extended from time to time until the last extension dated June 27, 1998 and in accordance with the same, the J V Agreement lapsed on or about June 11, 2002. Thereafter, neither of the parties took any steps for its renewal. 1.3 In February 2003, the Target Company offered further equity shares in the Company by way of a rights issue to the existing shareholders. The offer was contained in the Letter of Offer dated January 30, 2003. The rights issue was proposed in

Government of Bihar had intimated to BSIDCL that it “will not be proper to invest further” by the Government of Bihar/BSIDCL in the Company. HIL by its letter dated June 18, 2002 undertook that it will subscribe to its rights entitlement in full, and in addition it intends to apply for additional shares to the extent the issue was undersubscribed. It was further stated that such acquisition of shares, if allotted to HIL would be in accordance with the provisions of Regulation 3(1)(b) of the SEBI ( Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the Regulations) and will therefore be exempt from the applicability of Regulations 11 and 12 of the Regulations. 1.5. On May 7, 2003, shares were allotted pursuant to the rights issue. The shareholding of the Target Company before and after the rights issue is as follows: Shareholder Pre-Rights Issue Post Rights Issue No. of Shares Percentage No. of Shares Percentage BSIDCL 20,28,000 26% 20,28,000 8.67% HIL 15,60,000 20% 1,27,62,287 54.57% Pilani 3,90,000 5% 3,90,000 1.66% Public 38,22,000 49% 82,06,213 35.10% Total 78,00,000 100% 2,33,86,500 100%

Source: SecMarx — sebi:CO/155/CRD/02/2005. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.