sebi:WTM/GA/134/CFD/2/07

SEBI · SEBI · 2006-07-14 · G. Anantharaman, Whole Time Member

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Facts / Headnote

Exemption application denied; application disposed of

Provisions invoked

• s. 19

Regulations

• Reg. 4
• Reg. 4(2)
• Reg. 10
• Reg. 3(1)

Holding

SEBI denied the acquirer's application for exemption from the obligation to make an open offer under Regulation 10 of the Takeover Regulations in respect of its proposed acquisition of 25.10% of the equity shares of Daikaffil Chemicals India Limited by way of preferential allotment, and disagreed with the Takeover Panel's recommendation to grant exemption.

Full text

Home » Enforcement » Orders » Orders of Chairman/Members Enforcement Enforcement▼ ORDER IN THE MATTER OF PROPOSED ACQUISITION OF EQUITY SHARES OF DAIKAFFIL CHEMICALS INDIA LIMITED – 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/134/CFD/2/07 1.0 BACKGROUND 1.1 M/s Daikaffil Chemicals India Limited (hereinafter referred to as ‘the target company’) is a company incorporated under the Companies Act, 1956, having its registered offic Nariman Bhavan, Nariman Point, Mumbai-400021. The equity shares of the target company are listed on the Bombay Stock Exchange Ltd. (BSE) 1.2 G.E. Chemical Company S.A. (hereinafter referred to as the acquirer) is presently not holding any shares in the target company. The acquirer proposes to acquire 25.10% share target company by way of preferential allotment on private placement basis. 2.0 APPLICATION FOR EXEMPTION 2.1 The proposed preferential allotment on private placement basis would increase the shareholding of the acquirer from nil to 25.10% of the voting capital of the target comp therefore would trigger regulation 10 of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred t Takeover Regulations). In view of the above, the acquirer, vide letter dated July 14, 2006 (as revised on  July 31, 2006) filed an application with SEBI under regulation 4(2

1.1 M/s Daikaffil Chemicals India Limited (hereinafter referred to as ‘the target company’) is a company incorporated under the Companies Act, 1956, having its registered office at 52, Nariman Bhavan, Nariman Point, Mumbai-400021. The equity shares of the target company are listed on the Bombay Stock Exchange Ltd. (BSE) 1.2 G.E. Chemical Company S.A. (hereinafter referred to as the acquirer) is presently not holding any shares in the target company. The acquirer proposes to acquire 25.10% shares in the target company by way of preferential allotment on private placement basis. 2.0 APPLICATION FOR EXEMPTION 2.1 The proposed preferential allotment on private placement basis would increase the shareholding of the acquirer from nil to 25.10% of the voting capital of the target company and therefore would trigger regulation 10 of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the Takeover Regulations). In view of the above, the acquirer, vide letter dated July 14, 2006 (as revised on July 31, 2006) filed an application with SEBI under regulation 4(2) read with regulation 3(1) (l) of the Takeover Regulations. Since, the post acquisition shareholding of acquirer shall increase to a level beyond 15%, the exemption is sought from the applicability of regulation 10 of the Takeover Regulations, inter alia on the following grounds:- i) The acquirer through its affiliated subsidiary ERCA, have been buy

to subscribe to Equity Shares of DCIL with clear understanding that the funds would promptly be utlised for expanding Capacity. Further the acquirer itself has financial constraints to invest beyond 25.10% of the Equity Share Capital of DCIL. iv) If exemption is not granted, then the whole idea of supporting the target company might be jeopardized due to the fact that Promoters of the target company might not agree to allow the acquirer to come out with an open public offer for securing their stake as promoters and management (at present they hold around 43% together with their associates and persons acting in concert). Further G.E. Chemical Company S.A. and its Associates as outsourcing partners may be compelled to look at other avenues for securing their prime objective of sure and steady supply of required materials. In the situation that exemption is not granted, perhaps the acquirer and its associate ERCA of Italy might eventually tie up with other entities in India for outsourcing its supplies. v) Exemption will benefit the stakeholders of the target company both in short and long term 2.2 The shareholding pattern of the target company before and after the proposed acquisition (as mentioned in the aforesaid application) is as under: Shareholders’ category Number of registered shareholders as on date of application Before the proposed acquisition After the proposed acquisition Number of shares/ total voting rights held % of shares/ total voting capital held Number of sha

Source: SecMarx — sebi:WTM/GA/134/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.