Dear All,
In the case of M/s Jain Studios Limited the SEBI vide its order dated 17th Oct 2007 has granted exemption from Open Offer under Regulation 11(2 & 2A) SEBI SAST Regulations for acquisition of shares by the promoters via preferential issue of shares to the extent of around 20% of voting capital.
Generally the SEBI will not give exemption from the open offer where a substantial shareholder (Promoters) of a target Company acquiring voting capital via preferential issue of shares for enhancing his shareholding as it may be lead to denying of opportunity to the small shareholders to exit from Company.
However, in this case the SEBI granted exemption from the Open Offer for acquisition of the shares via preferential issue based strong submission by the acquirers ( Promoters).
Please find below extract of the SEBI order in this connection and all of you requested to read the same.
SECURITIES AND EXCHANGE BOARD OF INDIA
ORDER
IN THE MATTER OF PROPOSED ACQUISITION BY PREFERENTIAL ALLOTMENT OF EQUITY SHARES OF JAIN STUDIOS LTD. BY ANKUR SERVICES AND GROWTH FUND LTD. – EXEMPTION APPLICATION FILED UNDER REGULATION 4(2) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997.
1.0 BACKGROUND
1.1 Jain Studios Ltd. (hereinafter referred to as the target company) is a company limited by shares incorporated under the Companies Act, 1956, having its office at Scindia Villa, Ring Road, Sarojini Nagar, New Delhi – 110023. The equity shares of the target company are listed on the Bombay Stock Exchange Ltd. (BSE), National Stock Exchange of India Ltd. (NSE), The Calcutta Stock Exchange Association Ltd. (CSE), The Delhi Stock Exchange Association Ltd. (DSE), Ahmedabad Stock Exchange Ltd. (ASE), Madras Stock Exchange Ltd. (MSE) and Vadodara Stock Exchange Ltd. (VSE).
1.2 Ankur Services and Growth Fund Ltd. (hereinafter referred to as the acquirer) belonged to the promoter group of the target company and currently holds 72,857 equity shares, constituting 0.5% of the total paid up capital of the target company. The promoter group of the target company (including the acquirer and the persons acting in concert) collectively holds 78.82 Lac shares of the target company constituting 54.79% of its paid up capital.
2.0 APPLICATION FOR EXEMPTION
2.1 The acquirer, vide letter dated June 08, 2007, forwarded an application to Securities and Exchange Board of India (hereinafter referred to as SEBI) made under regulation 4(2) read with regulation 3(1) (l) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, (hereinafter referred to as the Takeover Regulations). The said application has been filed seeking exemption from making public announcements and open offer under the provisions of regulation 10 and 11 of the Takeover Regulations with respect to its proposed acquisition of 1,15,94,203 equity shares of the target company @ Rs. 10 each at a premium of Rs. 7.25 per share, by way of preferential allotment. The exemption has been sought inter alia on the following:
i) The issuance of shares is necessitated, as a part of the settlement with the Industrial Development Bank of India (IDBI) through "Stressed Assets Stabilization Fund" (SASF) and the proposed allotment would make the target company debt free.
ii) Incase the target company does not carryout the proposed preferential allotment, it runs many risks including:
a) Non-settlement of dues with IDBI/SASF and the possible sinking of all capital of public financial institution.
b) Loss of over Rs. 43 crore which would wipe-off the entire net-worth of the target company which stood at Rs. 27.32 crores on March 31, 2006.
c) The target company operates in an industry where technology changes very quickly and incase of non-settlement, it would not be able to recapitalize its business. It would lead to further obsolescence of its technology and folding up of its main business in the near future.
d) The shareholders (8400) of the target company might loose their entire investment in it.
iii) The target company with the help of the acquirer and SASF managed to secure a deal which would revive its business and non execution of the said deal would be fatal to the target company and its shareholders.
2.2 The shareholding pattern of the target company before and after the proposed preferential allotment, as per the aforesaid application, is given below:
Category | No. of shares/ total voting rights held
| Percentage of Shareholding
| ||
| Before the proposed acquisition
| After the proposed acquisition
| Before the proposed acquisition
| After the proposed acquisition
|
Promoters | 2,02,959 | 2,02,959 | 1.41 | 0.78 |
Acquirer (along with the persons acting in concert) | 76,79,657 | 1,92,73,860 | 53.38 | 74.19 |
Mutual Funds | 1,900 | 1,900 | 0.01 | 0.007 |
Public | 65,03,366 | 65,03,366 | 45.21 | 25.02 |
TOTAL | 1,43,85,982 | 2,59,80,185 | 100.00 | 100.00 |
3.0 RECOMMENDATION OF THE TAKEOVER PANEL
3.1 The aforesaid application of the acquirer was forwarded to the Takeover Panel by SEBI, in terms of Regulation 4 (4) of the Takeover Regulations and the Takeover Panel vide its report dated July 09, 2007 has recommended as under:
"The Panel considered the application and the documents filed in support and the factors, which are noted above and found that it is in the interest of common shareholders to recommend exemption as sought for and hence the Panel recommends exemption."
4.0 FURTHER SUBMISSIONS
4.1 The acquirer, inter alia stated that the preferential allotment of 115.94 lac shares of the target company would be made only to the acquirer and that pursuant to the said proposed allotment, the promoters' shareholding in the target company would increase to 74.97% of the enhanced paid up capital of the target company.
4.2 The acquirer, vide its letter dated July 31, 2007 and e- mail dated August 10, 2007 has further confirmed that:
i. the target company has complied with the Guidelines for Preferential Allotment including pricing as prescribed under Chapter XIII of the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000.
ii. an Extra-Ordinary General Meeting ( EGM) of shareholders of the target company was convened on May 25, 2007 seeking the approval of its shareholders under section 81(1A) of the Companies Act, 1956 in respect of the proposed preferential allotment to the acquirer. The shareholders approved the special resolution under section 81 (1A) of the Companies Act, 1956 in respect of the said preferential allotment. The said resolution was approved by the shareholders of the target company other than the acquirer and that the acquirer had abstained from voting on the said resolution.
5 .0 FINDINGS:
5.1 I have carefully considered the application dated June 08, 2007 filed by the acquirer, the letter dated July 31, 2007, e-mail of the acquirer dated August 10, 2007 , the recommendations of the Takeover Panel and the relevant materials available on record.
5.2 I note, from the letter dated January 29, 2007 of SASF (filed by the acquirer along with its application) addressed inter alia to the target company/acquirer, that, the target company had taken a term loan of Rs. 24 crore from IDBI and that the acquirer along with others stood as guarantors for the said loan. SASF, in the said letter had inter alia advised the target company and the acquirer to repay the said loan together with the interest, accrued interest etc. The acquirer, vide letter dated nil (received by SEBI on June 12, 2007 ) further stated that SASF had agreed to settle the loan for an aggregate amount of Rs.21,18,00,000/-. It has been stated in the said letter that the target company had entered into an agreement dated March 30, 2007 with the acquirer and that the acquirer had agreed to step into the shoes of the target company in respect of the aforesaid loan. It was also stated that the acquirer would be totally and completely liable for all the payments towards SASF in respect of the above loan and that it would indemnify the target company from all the claims of SASF. The acquirer in the said letter had also informed that, towards the consideration for providing the money for repayment for the said loan, target company needed to issue its 1,15,94,203 equity shares to the acquirer.
5.3 I note that the acquirer belonged to the promoter group of the target company (promoter group) which holds 54.79% (together with the persons acting in concert) of the total paid up equity capital of the target company and the proposed acquisition by way of preferential allotment would increase the said shareholding of the promoter group to 74.97% of the total paid up equity capital of the target company. As the acquirer together with the other promoters is already having control over the target company, I note that there would not be any change in control pursuant to the proposed acquisition.
5.4 I further note that the EGM for passing the special resolution under section 81(1A) of the Companies Act, 1956 in respect of the proposed preferential allotment to the acquirer was held on May 25, 2007. In the notice sent to the shareholders in terms of section 173 of the Companies Act, 1956, the target company had proposed to the shareholders that the proposed preferential allotment (exclusively to the acquirer) would be pursuant to and in accordance with the Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 and subject to other approvals, permissions, etc. I note that, in the explanatory statement forming part of the notice of EGM, the target company had inter alia disclosed the identity of proposed allottee (the acquirer), the object and intention of the proposed preferential allotment, consequential changes, if any, etc. I also note from the submissions of the acquirer that it had abstained from voting on the special resolution.
5.5 I have also taken note from the submission by the acquirer that the special resolution required under section 81 (1A) of the Companies Act, 1956 has been passed by the shareholders of the target company after making all requisite disclosures to the shareholders to the notice of EGM and explanatory statement thereto. The target company, in respect of facility of voting through postal ballot for passing of the special resolution, vide e-mail dated August 10, 2007 informed SEBI that it would be difficult for it to take the approval of the shareholders again, as the cost involved in the process would very high. In the facts and circumstances of the case, especially in view of the fact that the special resolution for the preferential issue of shares was passed in the EGM held on May 25, 2007 and that the required disclosures had already been made in the explanatory statement, I am of the view that condition of passing special resolution under section 81 (1A) of the Companies Act, 1956 by providing facility of voting through postal ballot may not be insisted in this case.
5.6 In view of the above, I agree with the recommendations of the Takeover Panel and consider the present case as a fit case for granting exemption from making a public announcement as required under regulation 11 of the Takeover Regulations.
6.0 ORDER
6.1 In view of the foregoing, I , in exercise of the powers conferred upon me by virtue of section 19 of the Securities and Exchange Board of India Act, 1992 read with sub - regulation (6) of regulation 4 of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, hereby grant exemption to the acquirer, namely Ankur Services and Growth Fund Ltd. from complying with the provisions of Regulation 11 of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 with regard to the proposed preferential allotment of 1,15,94,203 equity shares of the target company, namely Jain Studios Ltd. ,subject to the conditions that the acquirer and the target company shall ensure –
i ) that in respect of the proposed preferential allotment, the relevant norms including the norms regarding the pricing specified in Securities and Exchange Board of India (Disclosure and Investor Protection) Guidelines, 2000 are observed and complied with;
ii) that there shall be no reduction in the minimum level of public shareholding required as per the listing agreement pursuant to the proposed preferential allotment and that the target company shall maintain the minimum level of public shareholding, as required in terms of the listing agreement.
iii) the target company shall comply with the undertaking given by it vide letter dated July 31, 2007.
6.2 The acquirer shall complete the proposed transaction within 30 days from the date of the order and file a report with Securities and Exchange Board of India in the manner specified in Regulation 3(4) read with Regulation 3(5) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 confirming compliance including conditions specified in this order.
G. ANANTHARAMAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA
Place: Mumbai
Date: October 17, 2007
Thanks & Regards
--
Alagar
09884731993
--
Vj
Trezrrr every pulsss
http://yehseeyes.blogspot.com/
0 comments:
Post a Comment