sebi:WTMN/2/CFD/4/04

SEBI · SEBI · 2002-08-05 · T M Nagarajan, 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

Direction to make public announcement under Chapter III of the Takeover Regulations

Provisions invoked

• s. 11
• s. 19
• s. 15H
• s. 15

Regulations

• Reg. 7
• Reg. 4
• Reg. 6
• Reg. 11
• Reg. 3
• Reg. 2(1)(c)
• Reg. 2(1)
• Reg. 10
• Reg. 12
• Reg. 8
• Reg. 14
• Reg. 3(i)
• Reg. 14(1)
• Reg. 44
• Reg. 1
• Reg. 22
• Reg. 11(1)
• Reg. 8(3)
• Reg. 8(2)
• Reg. 7(3)

Parties

• Hitachi Home and Life Solutions Inc.
• Hitachi India Pvt. Ltd.

Holding

The acquisition of 19.37% equity by Hitachi Group from Lalbhai Group on 18.01.2003 was not eligible for exemption under Regulation 3(1)(e)(iii)(a)/(b) and was in violation of Regulation 11(1) and/or 12 of the Takeover Regulations; Hitachi Home and Life Solutions Inc. and Hitachi India Pvt. Ltd. were directed to make a public announcement under Chapter III of the Takeover Regulations.

Full text

2 Hitachi India Pvt Ltd & Hitachi Ltd together held 35.2% in the paid up share capital of Target company, with the remaining 29.6% held by the public. Subsequently, Hitachi Ltd transferred its entire shareholding in the Target company to its 100% owned subsidiary, Hitachi Home and Life Solutions Inc on 01.04.2002. As a result, the collective shareholding of Hitachi Home and Life Solutions Inc. and Hitachi India Pvt. Ltd. {hereinafter collectively referred to as”Hitachi Group/Acquirers”} became 35.2% in the Target Company.

3 10 of the Regulations. The said application for exemption was forwarded to and considered by the Takeover panel and the panel did not find merit in recommending grant of exemption. The panel observed as under:- “On the facts stated in the application, the exemption is sought under regulations 3(1)(f)(iv) and 3(1)(l) of the Takeover Code. Regulation 3(1)(f)(iv) of the Takeover Code has no application since it applies to acquisition of shares in the ordinary course of business by banks and financial institutions as pledges. No case is made out to recommend grant of exemption under regulation 3(1)(l) of the Takeover Code. Hence, grant of exemption as sought is not recommended.”

4 repurchase of the aforementioned shares from ICICI Bank Ltd, the Lalbhai Group would be required to comply with the provisions of regulation 10 of the Regulations. 1.8 It was observed that Target company made a disclosure to Bombay Stock Exchange (BSE) on 25.09.2002 stating inter alia that “The company has earlier obtained approval of Foreign Equity Participation up to 74%. Company has made an application to FIPB to revalidate and reinstate the earlier approval to facilitate increase in stake of the foreign partner. The promoters are at an advanced stage of discussion for the transfer of Lalbhai Group stake to Hitachi but the details are yet to be finalized. The transaction, if worked out, would be subject to eventual agreement between the two promoters and necessary regulatory approvals.” 1.9. Meanwhile, vide letter dated 26.09.2002, Lalbhai group along with the Hitachi group [stated to be persons acting in concert (PACs)] informed SEBI that they intended to acquire 14,59,562 shares (9.94%) from ICICI Bank Ltd. It was stated that the acquisition of the aforesaid shares was under the then existing creeping limit of 10% in terms of sub-regulation (1) of regulation 11 of the Regulations. The Lalbhai group acquired these 9.94% shares from ICICI Bank Ltd at a price of Rs.33.53 per share. 1.10 The entire shareholding of 19.37% (inclusive of the 9.94% shares bought from ICICI Bank Ltd.) held by Lalbhai Group was acquired by Hitachi Group on 18.01.2003. 1.11 A report dated 24.01.2

Source: SecMarx — sebi:WTMN/2/CFD/4/04. 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.