sebi:CO/45/TO/06/2003

SEBI · SEBI · 2003-03-21 · G.N. Bajpai, Chairman, Securities and Exchange Board of India

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Facts / Headnote

Exemption granted from complying with Chapter III of the Regulations (open offer requirements) for the proposed preferential allotment of 16,50,000 equity shares, subject to conditions.

Regulations

• Reg. 4
• Reg. 3(4)
• Reg. 11
• Reg. 3

Holding

SEBI granted exemption to the Acquirers from the obligation to make an open offer under Chapter III of the Takeover Regulations in connection with a proposed preferential allotment of 16,50,000 shares that would increase promoter shareholding from 61.84% to 74.56%, subject to conditions including shareholder approval by special resolution, postal ballot facility, and abstention by interested promoters from voting.

Full text

(hereinafter referred to as `Target company’) by way of preferential allotment. The Acquirer and the persons acting in concert with him are part of promoter group of the Target company and hold 61.84% equity share capital of the target company. As a result of the proposed acquisition, the Acquirers have to make an open offer to the public shareholders of the Target company in terms of sub regulation (1) of regulation 11 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as "the Regulations"). 1.1 The shares of the Target company are listed at the Stock Exchange Mumbai, Delhi Stock Exchange, Ludhiana Stock Exchange and The Calcutta Stock Exchange. 2.0 The Acquirers made an application dated 21.03.03 under sub-regulation (2) of Regulation 4 of the Regulations to the Securities and Exchange Board of India (hereinafter referred to as "SEBI") seeking exemption from compliance of the provisions of sub regulation (1) of Regulation 11 of the Regulations. 3.0 In the aforesaid application and letter dated 21.03.03, it was submitted that : 3.1 The Acquirers propose to acquire 16,50,000 shares representing 33.33% of the post issue paid up capital of the Target company at the price of Rs.10/- per share by way of preferential allotment. 3.2 The Acquirer and the persons acting in concert are the promoters of the Target company. After the proposed preferential allotment the shareholding of the promoter group in the Target company will increas

FIs / Banks - - - - FIIs / NRIs / OCBs 300 - 300 - Public 1259000 38.16% 1259000 25.44% Total 3300000 100.00 3300000 100.00 3.5 Punjab National Bank, the appraising and lead lending bank has stipulated that the amount of Rs.165 lacs is to be brought in by promoters as their contribution in the shape of preferential offer to meet part of the project cost. This amount was to be brought in by March 31, 2003 which could not be brought in by way of rights or public issue in such a short time. 3.6 The conditions in the primary market were not conducive for the Target company to enter the capital market either with a public or rights issue. 3.7 The promoters would be subscribing to the shares of the Target company at a price of Rs.10/- per share as against its current market price of Rs.6.10/- and the average price of only Rs.8.95/- for the last one year. 3.8 The interest of outside shareholders would not be adversely affected as after the implementation of the project the shareholder’s value is likely to increase substantially as the Target company was setting up a project through bank funding, promoters contributions and internal accruals without putting any burden on outside shareholders. The expected increase in profitability on implementation of the project was likely to enhance the shareholders value of existing shares also. 3.10 The acquirer alongwith persons acting in concert would be contributing Rs.165 lacs to the proposed project and there is no intention to increase the

"On the facts stated, the proposed preferential allotment appears to be in the overall interest of investors at large and grant of exemption, as sought, is recommended" 5.0 I have taken into consideration the application dated 21.03.03, the facts and documents available on record and also the recommendation of Takeover Panel. 6.0 I have noted that the Acquirers being the promoters of the Target company have provided funds to the Target company so that it could meet the stipulations of the Banks for sanction/ enhancement of their working capital limits. 6.1 I have also noted that the funds to the tune of Rs.165 lacs, so given by the Acquirers to the Target company, could not have been brought in by way of rights or public issue in such a short time and the Target company proposes to issue 16, 50,000 shares on preferential basis representing 33.33% of the post issued paid up capital to the Acquirers against the aforesaid sum so advanced by acquirers. 6.2 I have also observed that in the instant case, the general meeting of shareholders of the Target company is yet to be convened by the Board of the Target company for getting the approval of the shareholders for the proposed preferential allotment in favour of the Acquirers. 6.3 I have noted that pursuant to the proposed preferential allotment, there would be no change in control of the Target company. 6.4 In the facts and circumstances of the instant case, and on the basis of the recommendation of the Takeover panel, I find mer

Source: SecMarx — sebi:CO/45/TO/06/2003. 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.