sebi:WTM/TCN/08/CFD/JUNE/2008

SEBI · SEBI · 2008-01-09 · T. C. Nair, Whole Time Member

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Facts / Headnote

Exemption granted from complying with Regulation 11 of the Takeover Regulations, subject to conditions

Provisions invoked

• s. 19
• s. 81
• s. 173

Regulations

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

Holding

SEBI granted exemption to Teletube Electronics Ltd. and CEA Consultants Pvt. Ltd. from complying with Regulation 11 of the Takeover Regulations in respect of the proposed preferential allotment of 6,97,6744 equity shares/warrants, subject to conditions regarding pricing norms and maintenance of minimum public shareholding at 25%.

Full text

2 2.1 Vide letter dated 09.01.2008, CEA Consultants Pvt. Ltd., one of the acquirers forwarded an application to the Securities and Exchange Board of India (SEBI) made under regulation 4(2) read with regulation 3(1) (l) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, (hereinafter referred to as “the Takeover Regulations’). 2.2 The said application has been filed seeking exemption from the applicability of Regulation 11(1) of the Takeover Regulations with respect to the proposed acquisition of 46,51,163 equity shares of Rs. 10 each at a premium of Rs. 11.50 per share and 23,25,581 equity shares (considering conversion of warrants) of Rs. 10 each at a premium of Rs. 11.50 per share of the target company by way of preferential allotment. The exemption has been sought submitting inter alia the following: i. The target company experienced severe liquidity crisis due to various reasons over the last two years. Due to the same, the target company applied under scheme of Corporate Debt Restructuring (CDR) framed by RBI. ii. The CDR scheme was sanctioned by CDR cell of RBI vide letter No. CDR(AG)/721/2007-2008 dated 27.09.2007. iii. In terms of the CDR scheme, the promoters have to infuse Rs. 15 crore as part of their share of the restructuring scheme sanctioned by CDR cell of RBI. Out of this 15 crore, Rs. 10 crore to be bought within 3 months and remaining Rs. 5 crore within 12 months from the approval of the CDR scheme.

3 iv. The equity shares and warrants are being issued to the acquirers in order to comply with the scheme of CDR approved by CDR cell of RBI. v. The approval of the shareholders of the target company has been taken on 29.11.2007. vi. The acquirers proposes to acquire 46,51,163 shares at Rs. 21.50/- (including a premium of Rs. 11.50/-) and 23,25,581 warrants having optional right conversion into equity shares at the same price. vii. The said equity shares and warrant will be issued in the manner and at the conversion price computed in accordance with Chapter XIII of the SEBI DIP Guidelines. viii. Teletube and CEA Consultants hold 10.11% and 1.07% respectively in the target company and pursuant to the acquisition of shares and warrants (after conversion) their shareholding will increase to 15.40% and 7.35% respectively in the target company. Collectively, the holding of the acquirers would increase from 11.18% to 22.75% considering fully diluted voting capital. ix. The holding of the total promoter group would increase from 41.06% to 48.74% considering conversion of warrants and fully diluted voting capital. x. As the increase in the total promoter holding would be more than 5% of the creeping limit available, Regulation 11(1) of the Takeover Regulations would get attracted. The acquirers belong to the promoter group and there would not be any change in the

4 control over the target company pursuant to the said acquisition by the acquirers. xi. The CDR scheme will become non-operational and jeopardized if the promoters are not able to bring their shares of contribution in the target company. 3.0 RECOMMENDATION OF THE TAKEOVER PANEL 3.1 The aforesaid application dated 09.01.2008 in terms of sub-regulation (4) of Regulation 4 of the Takeover Regulations was forwarded to the Takeover Panel and the Takeover Panel vide its report dated 21.02.2008 has recommended as under: “the acquirers are infusing funds into the target company as per the Corporate Debt Restructuring Scheme approved by the CDR cell. The Scheme may become non-operational if the funds to the extent of Rs. 15 crore are not infused in by the promoters which in turn may affect the revival/rehabilitation of the target company. The acquirers belong to the promoter group and there would not be any change in control over the target company pursuant to the said acquisition by the acquirers. The proposed preferential allotment of equity shares and warrants in accordance with the pricing formula laid down in the Chapter XIII of the SEBI (DIP) Guidelines, appears to be in the larger interest of the company and beneficial to the public shareholders. The Panel therefore, recommends grant of exemption to the acquirers.” 4.0 FURTHER SUBMISSIONS 4.1 The target company and the acquirers, vide their letters dated 27.02.2008, have submitted that the following disclosures were made in

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