sebi:WTM/GA/131/CFD/2/07

SEBI · SEBI · 2005-10-06 · G. Anantharaman, Whole Time Member

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Facts / Headnote

Exemption granted from Regulation 11(1)

Provisions invoked

• s. 19
• s. 81
• s. 173

Regulations

• Reg. 4
• Reg. 4(2)
• Reg. 11(1)
• Reg. 3(5)
• Reg. 3(4)
• Reg. 3(1)

Holding

Exemption was granted to Victory Press Private Ltd. from complying with Regulation 11(1) of the Takeover Regulations for the proposed preferential allotment of 40 lacs equity shares of Victory Paper and Boards (India) Ltd., subject to compliance with undertakings dated March 13, 2006 and August 14, 2006.

Full text

Home » Enforcement » Orders » Orders of Chairman/Members Enforcement Enforcement▼ ORDER IN THE MATTER OF PROPOSED ACQUISITION OF EQUITY SHARES OF VICTORY PAPER AND BOARDS (INDIA) LTD. – EXEMPTION APPLICATION FILED UNDER REGULATION 4(2) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997. WTM/GA/131/CFD/2/07 1.0 BACKGROUND 1.1 M/s Victory Papers and Boards (India) Ltd.( hereinafter referred to as ‘the target company’) is a company limited by shares incorporated under the Companies Act, 1956, ha registered office at Kunnamkulam, Kerala. The equity shares of the target company are listed on the Bombay Stock Exchange Ltd. (BSE), The Cochin Stock Exchang Ahmedabad Stock Exchange Ltd. and Madras Stock Exchange Ltd. 1.2 Victory Press Private Ltd. (hereinafter referred to as ‘the acquirer’) belong to the promoter group of the target company and holds 8.29% in the total voting up capital of the company. The holding of the promoter group (including the acquirer) in the target company is 54.29% in its total voting capital. The target company proposes to issue 40 lacs shares of face value of Rs. 10 each @ Rs. 10 per share to the acquirer by way of preferential allotment. Pursuant to the proposed allotment, the shareholding of the acquire target company would increase from 8.29% to 36.37% and that of the promoter group (including the acquirer) would increase from 54.29% to 68.28% in the total voting capita 2.0 APPLICATION FOR E

2 NRI’s 579000 5790000 6.39 5790000 SUB TOTAL 4920100 49201000 54.29 89201000 68.28 B. NON-PROMOTERS HOLDING 3. Resident Indian ( Fully paid 2620753 partly paid 294200) Rs. 5/- paid per share 2914953 27678530 30.54 27678530 21.18 a. Non-resident Indian 16500 165000 0.18 165000 0.13 b. Body Corporates ( Fully paid 965256 partly paid 580000) Rs. 5/- paid per share 1545256 12552560 13.85 12552560 9.60 c. Foreign Institutions and Banks 103191 1031910 1.14 1031910 0.79 SUB-TOTAL 4579900 41428000 45.71 41428000 31.72 GRAND TOTAL 9500000 90629000 100 130629000 100 * out of 95,00,000 shares, there were 8,74,200 partly paid up shares on which Rs.5/- per share has been paid up. They carry voting rights in proportionate to amount paid up 3.0  RECOMMENDATION OF THE TAKEOVER PANEL 3.1 The aforesaid application filed by the acquirer together with its subsequent correspondences were forwarded by SEBI to the Takeover Panel in terms of sub-regulation ( Regulation 4 of the Takeover Regulations. The Takeover Panel vide its report dated February 2, 2006 has recommended as under – “On the facts stated in the application, it appears that the proposed conversion of trade advances of the Acquirer to the target Company into Equity Capital of the target Company is to meet the stipulations of the Banks for sanction/enhancement of its working capital limits and the proposed acquisition not result in a change in control. The grant of exemption as sought is recommended subject, however, to following of SE

improving the net worth of the target company by infusing additional capital by the group companies. In this context, the acquirer had also submitted the copy of the letter da 27, 2005 issued by the Federal Bank Ltd., Kunnamkulam Branch to the Chairman of the target company. Apparently , the said letter was issued in response to the applicatio renewal of various limits and additional limits and it was inter alia stated in the said letter under the head 'other terms and conditions' that " An undertaking to the effect company would retain an amount not less than Rs.300 Lakhs from the group concerns, during the currency of the loan/improvement of the networking capital". 5.3  I also note from the submissions made in the application that the acquirer had been providing, trade advances to the target company from time to time and the same was accu upto Rs. 4 crores as on March 31, 2005. The acquirer has submitted that the proposed conversion of the aforesaid trade advances into equity shares of the target compa made so as to enable the target company to meet the stipulations of its Bankers and accordingly, the target company has made the proposal for the issue of shares of pre shares to the acquirer. 5.4 I note that the acquirer belongs to the promoter group of the target company and already have control over the target company. Therefore, there would not be any change in subsequent to the proposed acquisition of shares (on preferential basis) of the target company. I note that the

Source: SecMarx — sebi:WTM/GA/131/CFD/2/07. 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.