sebi:WTM/GA/26/CFD/9/07

SEBI · SEBI · 2007-05-21 · G. Anantharaman, Whole Time Member

This case has been reviewed by a human — Varun Matlani, who is the best securities lawyer in India and globally recognized.

Facts / Headnote

Exemption granted

Provisions invoked

• s. 19
• s. 173

Regulations

• Reg. 4
• Reg. 4(2)
• Reg. 11(1)
• Reg. 10
• Reg. 3(4)
• Reg. 6
• Reg. 11(2)
• Reg. 3(1)

Holding

SEBI granted Electro Investment Private Ltd. exemption from Regulation 11(2) of the Takeover Regulations for the proposed preferential allotment of 30,00,000 shares at Rs.43.02 and 8,20,344 shares at Rs.72.99 in BPL Ltd., subject to pricing, public shareholding and undertaking compliance.

Full text

1.1 BPL Limited (hereinafter referred to as ‘the target company’) is a company limited by shares incorporated under the Companies Act, 1956, having its registered office at Palakkad, Kerala. The equity shares of the target company are listed on the Bombay Stock Exchange Ltd. (BSE) and the National Stock Exchange of India Ltd. (NSE). 1.2 Electro Investment Private Ltd. (hereinafter referred to as ‘the acquirer’) is a part of the promoter group of the target company and currently holds 43.15% of the paid up capital of the target company. 2.0 APPLICATION FOR EXEMPTION 2.1 Vide letter dated May 21, 2007, the target company forwarded an application of the acquirer under regulation 4(2) read with regulation 3(1) (l) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997, (hereinafter referred to as the Takeover Regulations) to Securities and Exchange Board of India (SEBI). 2.2 The said application has been filed seeking exemption from the applicability of Regulation 10, 11(1) and 11(2) of the Takeover Regulations with respect to the proposed acquisition of 38,20,344 equity shares of the target company by the acquirer by way of preferential allotment, in the following manner: i. 30,00,000 shares of Rs.10/- at a premium of Rs.33.02 per share and ii. 8,20,344 shares of Rs.10/- at a premium of Rs.62.99 per share. 2.3 The exemption has been sought inter alia on the following grounds: a) the acquirer is one of the existing share h

d) a restructuring scheme was approved on December 9, 2004 by the Corporate Debt Restructuring (CDR) mechanism, set up by the Reserve Bank of India. e) the funding requirements for pay out under negotiated settlements and for fresh working capital were to be met out of multiple sources including divestment of non core businesses, sale and investments with long gestation periods and contribution by promoters. f) one of the sources of funding was a loan of Rs.92 crore to be raised from a foreign investor, to meet the gap in the amount required under the approved CDR Scheme. In order to save on the interest cost and servicing obligations on this loan, which will help in faster revival of the target company, promoters offered to bring in the required amount, which was accepted by the CDR Empowered Group. g) the acquirer had paid Rs.92 crore to the target company to ensure settlement of the secured creditors, working capital for its revival and payment of statutory dues, etc. The target company was not in a position to refund the sum to the acquirer and it was proposed that the balance of the funding to the target company be converted into equity by allotment of 38,20,344 equity shares of Rs.10 at a premium pursuant to the applicable SEBI Guidelines. h) Pursuant to the proposed acquisition of 38,20,344 equity shares of the target company, the shareholding of the acquirer alongwith persons acting in concert would increase from 66.26% to 68.91% of the total paid up equity share capi

Promoter group Acquirer 1 1,92,82,200 43.15 2,31,02,544 47.62 FIs/Banks 8 4,84,260 1.08 4,84,260 1.00 FIIs/NRIs/ OCBs 145 13,89,740 3.11 13,89,740 2.86 Public 22,269 1,32,07,700 29.55 1,32,07,700 27.23 Total 22,433 446,89,900 100.00 4,85,10,244 100.00 3.0 RECOMMENDATION OF THE TAKEOVER PANEL 3.1 The aforesaid application dated May 21, 2007 was forwarded to the Takeover Panel in terms of sub-regulation (4) of Regulation 4 of the Takeover Regulations and the Takeover Panel vide its report dated July 9, 2007 (forwarded to SEBI vide letter dated July 11, 2007) has recommended as under: “The Panel considered application and the documents as well as the department’s comments and found that successful implementation of CDR package is in the interest of share holders as stated by the applicant. There would be no change in the control and management of the company as a result of this preferential allotment as acquirer is one of the existing shareholders from the present promoter group. The Panel therefore finds that there is no hitch in recommending the proposal and recommends accordingly”. 4.0 FURTHER SUBMISSIONS 4.1 The target company/ acquirer vide their separate letters dated July 30, 2007, have further confirmed the following: i) A general meeting of shareholders of target company was called for passing a special resolution u/s 81(1A) of the Companies Act, 1956 for the said preferential allotment.

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