sebi:WTM/GM/CFD/28/2019-20

SEBI · SEBI · 2015-06-08 · G. Mahalingam, 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 subject to conditions

Provisions invoked

• s. 19
• s. 11(1)
• s. 11(2)

Regulations

• Reg. 3(1)
• Reg. 11(1)
• Reg. 14
• Reg. 11(5)
• Reg. 10(4)(b)

Holding

SEBI granted the Acquirers exemption from the mandatory open offer requirement under Regulation 3(1) of the Takeover Regulations for acquisition of shares/voting rights in Patel Engineering Limited via the proposed rights issue. The exemption is subject to conditions including compliance with applicable laws and post-acquisition reporting.

Full text

_____________________________________________________________________________________ Order in the matter of Patel Engineering Limited Page 2 of 12

_____________________________________________________________________________________ Order in the matter of Patel Engineering Limited Page 3 of 12 Company. However, even after the SDR Issuance, a major portion of debt of the members of JLF (the Residual Debt) still remained on the books of the Target Company. (5) Since even after the SDR Issuance, the Target Company was not in a position to repay the Residual Debt, it was decided to implement a Scheme for Sustainable Structuring of Stressed Assets (“S4A scheme”). As per the terms of S4A Scheme, JLF in its meeting dated Aug 08, 2017 asked Promoters/ promoter group to infuse fresh equity of Rs.150 Crore (the S4A Capital), to restore company’s liquidity situation, which the promoter/promoter group of the Target Company agreed to do. Accordingly, it was decided to infuse the capital in the form of Rights Issue. The Board of Directors in its meeting dated Oct 05, 2017 approved the Right Issue of equity shares with or without warrants for an amount up to Rs.300 Crore. Further, given the possibility of the Rights Issue not being subscribed to by all the non-promoter shareholders considering the state of affairs of the Target Company, the Acquirers agreed to subscribe to any unsubscribed portion of this Rights Issue to ensure that the minimum subscription threshold of 90%, as mandated under Regulation 14 of the erstwhile SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (ICDR Regulation) is met. However, given th

_____________________________________________________________________________________ Order in the matter of Patel Engineering Limited Page 4 of 12 the S4A Capital in two tranches of Rs.75 Crores each and that the first tranche be brought, in the form of unsecured subordinated debt, as a pre-condition to the implementation of the S4A Scheme. Accordingly, on November 24, 2017, the Acquirer 2 infused Rs.75 Crore by way of unsecured subordinated debt (the First Tranche S4A Infusion). On the basis of the same, Acquirer 2 infused the remaining amount of Rs.75 Crore by June, 2018 Thus, there was total capital infusion of 150 Crore (S4A Capital Infusion). (7) The S4A Capital infusion was financed through a borrowing by Acquirer-2. As a condition to availing this financing, Acquirer 2 was required to create a pledge/negative lien on the equity shares he would acquire pursuant to the Rights Issue as security for this financing. (8) The entire S4A Capital has been transferred to the escrow account established pursuant to the Financing Documents entered into with the Lenders, for utilization towards repayment of the existing Residual Debt. Such infusion has helped in restoring liquidity in the Target Company and in enabling a successful turnaround of operations. (9) Besides the above, the OC Letter had also mandated that a certain part of the Residual Debt be retired by way of invocation of pledge on the shares pledged by Acquirer-1, who, as part of the Financing Documents, had provided

Source: SecMarx — sebi:WTM/GM/CFD/28/2019-20. 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.