sebi:WTM/GA/118/SAST/1/07

SEBI · SEBI · 2006-09-15 · G. Anantharaman, Whole Time Member

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Facts / Headnote

Exemption granted

Provisions invoked

• s. 19
• s. 77A

Regulations

• Reg. 4
• Reg. 4(2)
• Reg. 11(2)
• Reg. 3(1)

Holding

SEBI granted exemption to Shri V.C. Nannapaneni and five other promoter-group acquirers from complying with Regulation 11(2) of the Takeover Regulations for the increase in voting rights from 62.28% to 63.37% consequent to the proposed buy-back offer of Natco Pharma Ltd.

Full text

2 2.0 APPLICATION FOR EXEMPTION 2.1 The target company has announced its plan to buy-back its equity shares from the shareholders at a price not exceeding Rs150 per share in terms of the provisions of section 77A, 77AA of the Companies Act 1956 and the provisions of the Securities and Exchange Board of India (Buy– Back of Securities) Regulations, 1998. Due to the said buy-back offer, the voting rights of the acquirers would increase from 62.28% to 63.37%, in case of 100% response to the said buy-back offer and the acquires not offering to sell any shares held by them in the proposed buy-back offer of the target company. 2.2 Shri. V C Nannapaneni ( on behalf of the acquirers), vide letter dated September 15, 2006, filed an application with the Securities and Exchange Board of India (hereinafter referred to as SEBI) under regulation 4(2) read with regulation 3(1) (l) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations,1997, (hereinafter referred to as the ‘Takeover Regulations’). Since, the post buy- back shareholding of acquirers will increase to a level beyond 55%, the exemption is sought from the applicability of regulation 11(2) of the Takeover Regulations, inter alia on the following grounds:- a) The acquirers are belonging to the promoter group of the target company and hold 62.28% of the share capital of the target company together with the persons acting in concert. The acquirers are in control over the target company.

3 b) Increase in voting rights of the acquirers is incidental to the buy-back proposal of the target company and is not an active acquisition. The said buy back proposal was made keeping the target companies desire to maximize returns to investors. The proposed buy back is expected to lead to reduction of outstanding equity shares which may lead to increase in earnings per share and thereby creating long term share holder value. c) Even after buy-back of the equity shares by the target company (incase of 100% response), the public share holding in the target company would be at a level more than which require for meeting the requirements of the listing agreements. d) The price at which the buy-back is proposed is Rs. 150/- (maximum cap). e) The acquirers do not propose to acquire a single share of the target company either directly or indirectly. The increase in their shareholding in the target company is only incidental to the proposed buy-back offer assuming 100% response in the said buy-back offer. f) There would not be any change in control over the target company pursuant to the increase in the shareholding of the acquirers.

4 2.3 The shareholding pattern of the target company before and after the proposed acquisition is as under: Shareholders’ category Number of registered shareholders as on date of application Shareholding

Source: SecMarx — sebi:WTM/GA/118/SAST/1/07. 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.