sebi:WTMO/204/CFD/03/2006

SEBI · SEBI · 2006-01-27 · T.C. Nair, Whole Time Member

Reviewed by Varun Matlani, Advocate — Securities Lawyer practicing in SAT and SEBI

Facts / Headnote

Exemption granted from Regulation 10 of Chapter III of the Takeover Regulations for the proposed inter-se transfer of 33.18% equity shares from IL&FS to the acquirer

Provisions invoked

• s. 19

Regulations relied on

• SEBI (SAST) Regulations, 1997

Holding

SEBI granted exemption to the acquirer from complying with Regulation 10 of Chapter III of the Takeover Regulations for the proposed inter-se transfer of 33.18% equity shares of the target company from IL&FS to the acquirer. The acquirer was directed to complete the transaction within 30 days and file a compliance report with SEBI.

Full text

2 of IL&FS in the target company. Pursuant to the proposed acquisition the acquirer’s holding (which is presently nil) will be 33.18% in the paid up equity capital of the target company. (b). IL&FS had earlier promoted the acquirer as a subsidiary in order to focus on the development, construction, operations and maintenance of toll roads using an array of available technologies. (c). As a part of consolidating road business in one vertical, IL&FS proposes to transfer the shares of the target company to the acquirer. (d). The acquirer being a subsidiary of IL&FS there would be no change in effective control of the target company consequent to transfer of shares from IL&FS to the acquirer. 2.2 From the shareholding pattern submitted in the application it is noted that after the proposed acquisition, the 33.18 shares held by IL&FS would be held by the acquirer and there will not be any other change in the shareholding pattern of the target company. 2.3 The IL & FS vide its letter dated 27.01.06 confirmed that it has complied with the disclosure requirements under regulation 8 of Chapter II of the Takeover Regulations. Further, in the last Annual Report 2004-05 of the target company, the names of the transferor i.e IL&FS and the transferee i.e. the acquirer are not mentioned as Group.

3 4.0 FURTHER SUBMISSIONS OF THE ACQUIRER 4.1 IL & FS vide its letter dated 08.03.06 has confirmed that the acquirer became its wholly owned subsidiary on December 21, 2005. The target company is a listed company of the IL & FS Group. Since the acquirer became subsidiary of IL & FS on December 21, 2005, its name does not appear as its related party in the Annual Report of the target company for its financial year 2005. 4.2 The IL & FS has also confirmed that it was holding 49% equity in the acquirer till it became a wholly owned subsidiary of IL & FS. Since its inception, the acquirer is working closely with IL & FS on various infrastructure initiatives and projects. The acquirer is one of the parties mentioned as a related party in the Annual Report of IL & FS of 2004-05. 5.0

4 had the acquirer and IL & FS being shown as ‘group’ in the last published Annual Report of the target company, the proposed acquisition would have been eligible for automatic exemption under regulation 3 (1) (e) (i) of the Takeover Regulations. 5.2 It is observed that the acquirer is a subsidiary of IL & FS and would be covered within the definition of ‘group’ as defined in the Monopolies and Restrictive Trade Practices Act, 1969. I have considered the submissions that although the acquirer was not shown in the last published Annual Report (for Financial Year 2004 – 05) of the target company, the transferor and transferee (acquirer) belong to the IL & FS Group and the acquirer has been disclosed as a related party in the Annual Report (2004-05) of the IL & FS. Further, the target company has also being shown as a related party in the same Annual Report of IL& FS. I have also taken note that the transferor (IL & FS) has complied with the requirements of regulation 8 of Chapter II of the Takeover Regulations. I find that in case of the transferee i.e. the acquirer the requirements of Chapter II were not applicable during the relevant time as it does not hold any shares in the target company till the proposed acquisition. It is observed that the shareholding of the IL & FS i.e. the promoter of the target company is proposed to be transferred to the acquirer which is subsidiary of the IL & FS. Therefore, no change in control of the target company would happen pursuant to the pr

Source: SecMarx — sebi:WTMO/204/CFD/03/2006. 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.