sebi:WTMO/TCN/CFD/2008

SEBI · SEBI · 2007-06-01 · T. C. Nair, 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 from making public announcement under regulation 11(2) of the Takeover Regulations; applications disposed of

Provisions invoked

• s. 19
• s. 77A
• s. 77A(2)

Regulations

• Reg. 4
• Reg. 6
• Reg. 3
• Reg. 10
• Reg. 8
• Reg. 15
• Reg. 3(1)
• Reg. 11(2)
• Reg. 3(1)(l)

Holding

SEBI granted exemption to the acquirers from the requirement of making a public announcement under regulation 11(2) of the Takeover Regulations in respect of the incidental increase in their shareholding/voting rights from 63.73% to 74.94% resulting from the target company's proposed buy-back. The exemption was extended to cover a fresh buy-back on the same terms, subject to conditions regarding price and minimum public shareholding.

Full text

2 2.3 At the meeting held on June 26, 2006, the Board of Directors of the target company passed a resolution under section 77A of the Companies Act with respect to the proposed buy-back of maximum 5,300,000 fully paid up equity shares of the target company at a maximum price not exceeding Rs. 40 per share and for a total amount not exceeding Rs. 21, 20, 00,000. The target company had made a public announcement on 07.09.06 in accordance with the provisions of regulation 8 read with regulation 15 of the SEBI (Buy-Back of Securities) Regulations, 1998. Pursuant to the said buy-back offer by the target company, the voting rights of the acquirers would increase from 63.73% to 74.94%, in case of 100% response to the said buy-back offer and the acquires not offering to sell any shares held by them in the proposed buy-back offer of the target company. 2.4 Since, the post buy-back shareholding of the acquirers may increase to a level beyond 55%, the exemption is sought from the applicability of regulation 11(2) of the Takeover Regulations, inter alia, on the following grounds:- a. The purchase of shares in terms of the proposed buy-back would be a positive act on the part of the target company and not on the part of the principal shareholders. The target company has proceeded with announcing the proposed buy-back on the basis of a unanimous

3 d. If the shareholders of the target company participate in the proposed buy-back to the fullest extent authorized by the target company’s Board of Directors, the shareholding and voting rights of the principal shareholders would still not exceed 74.94%, which is below the applicable maximum non-public shareholding as applicable to the target company. Should this criterion matter in resolving this issue, it is submitted that the public shareholding in the target company would still continue to remain at a level higher than 25%, even if the entire buy-back program as contemplated in the proposed buy-back is completely implemented. e. The proposed buy-back would not result in any change in control over the target company.

4 Shares Representing GDRs 354,946 1.00 Public 9,845,113 27.78 Total 35,436,472 100.00 30,136,472 100.00 3.0 RECOMMENDATION OF THE TAKEOVER PANEL – 3.1 The aforesaid applications were forwarded by SEBI to the Takeover Panel in terms of sub-regulation (4) of Regulation 4 of the Takeover Regulations. The Takeover Panel vide its report dated June 01, 2007 has recommended as under– “In this case, the voting rights of the promoters would increase from 63.73% to 74.97% as a result of the proposed buy-back. The proposed buy-back is intended to enhance earning per share (“EPS”). It is intended to create long term role for the shareholders. There is resolution of the Board authorizing the buy-back. The proposed buy-back would result as public shareholders being asked to access the case in company which cannot be distributed otherwise.

Source: SecMarx — sebi:WTMO/TCN/CFD/2008. 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.