sebi:WTM/KMA/CFD/132/09/2009

SEBI · SEBI · Dr. K. M. Abraham, 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

Regulations

• Reg. 11
• Reg. 10
• Reg. 4
• Reg. 5
• Reg. 12

Holding

The acquirers were granted exemption from making a public announcement under Regulations 10 and 11(1) & (2) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 for the proposed acquisition of 82,17,625 equity shares of Ucal Fuel Systems Limited by preferential allotment.

Full text

Page 2 of 8 Jayakar Krishnamurthy, Southern Ceramics Private Limited, Sujo Land & Properties Private Limited and Carburettors Limited (hereinafter referred to as the acquirers). Further, it is stated that Mr. Jayakar Krishnamurthy is son of Dr. V Krishnamurthy, who also holds shares in Southern Ceramics Private Limited and Sujo Land & Properties Private Limited. Further, in terms of the application, Mr. Jayakar Krishnamurthy hold shares in Minica Real Estate Private Limited. In view of the above, it was stated in the application that all the acquirers come under the promoters/ persons acting in concert (PAC) category of the target company. It was stated that the acquirers intend to subscribe Rs. 15 crores to the equity capital of the target company. As per the application, the said infusion is for the purpose of preventing the target company from becoming a sick company and also for the critical fund requirement of its wholly owned subsidiary namely, AMTEC Precision Products Inc. (hereinafter referred to as AMTEC), based in the United States of America. It is further stated that the acquirers propose to subscribe for equity shares for Rs. 29 crores by infusion of funds to an extent of Rs. 15 crores and by conversion of unsecured loan to an extent of Rs. 14 crores, through preferential allotment. In terms of the application, the shareholding of the acquirers along with the persons acting in concert would increase from the present 53.25% to 70.26%. Accordingly, the acquirers fi

Page 3 of 8 ii. The target company had an initial investment of Rs.100 crores in AMTEC which was financed through State Bank of India (SBI) and Export-Import Bank of India (EXIM Bank). AMTEC suffered considerable cash loss in the year 2005-2006 even though the customer demand was high. AMTEC had also taken loans from SBI, EXIM Bank, Bank of India and had also taken loans and advances from the target company. The target company had borrowed heavily to sustain the operation of AMTEC and that it had also given corporate guarantee to the loans obtained from SBI and EXIM Bank to AMTEC. iii. In order to meet the aforesaid fund requirement, the target company decided to allot equity shares to the acquirers on a preferential allotment basis. There would not be any change in control pursuant to the proposed preferential allotment as the acquirers belonged to the promoter group. 2.2 The shareholding pattern of the target company before and after the proposed preferential allotment (in terms of the application) is as under: Category No. of shareholders Before the proposed acquisition No. of shareholders After the proposed acquisition

Page 4 of 8 3.0 RECOMMENDATION OF THE TAKEOVER PANEL 3.1 The aforesaid application dated April 28, 2009 was forwarded to the Takeover Panel by SEBI. The Takeover Panel vide report dated June 11, 2009 has returned the said application with an observation that the proposal had not been approved by the shareholders of the target company. The Takeover Panel informed SEBI to advise the target company to seek the approval of its shareholders and thereafter approach SEBI for exemption. Thereafter, Minica Real Estates Private Limited (one of the acquirers), vide letter dated August 19, 2009 informed SEBI that the shareholders of the target company at the Extra Ordinary General Meeting held on August 19, 2009, unanimously approved the proposed preferential issue of 82,17, 625 equity shares of Rs.10/- each at a premium of Rs.26.35 per share to the promoters/persons acting in concert group. It also enclosed a copy of the proceedings of the said Extra Ordinary General Meeting and the certified true copy of the resolution passed by the shareholders at the said meeting. 3.2 Subsequently, the Takeover Panel vide report dated August 24, 2009 had given its recommendation as stated below: “The panel discussed the proposal at length and observed that the Target Company has extended its guarantee for Rs. 162.05 crores as on 31/3/2009 in respect of loans taken by AMTEC and in case the AMTEC is not given the desired financial support to come out of its financial crisis the guarantee obligations wi

Source: SecMarx — sebi:WTM/KMA/CFD/132/09/2009. 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.