GENERAL MANAGER
DIVISION OF CORPORATE RESTRUCTURING
Tel: 91-22-22823886
Fax: 91-22-22829520
Email:mdrao@sebi.gov.in
CFD/DCR/TO/MM/ /05
April 21, 2005
Bhuruka Gases Limited
Whitefield Road
Mahadevapura
Bangalore – 560 048
Dear Sirs,
Sub.: Request for interpretive letter under the SEBI (Informal Guidance) Scheme, 2003
Ref.: Your letter dated February 22, 2005
1. Please refer to your letter cited above, seeking interpretive letter under SEBI (Informal Guidance) Scheme, 2003 (Scheme). The Interpretive letter is sought on the issue as to whether the acquisition of 84,41,558 equity shares by Promoter Group of Bhuruka Gases Ltd. (BGL) whereby their voting rights will increase from 63.81% to 81.49%, will attract the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 {hereinafter referred to as “Takeover Regulations”} and any other SEBI Regulations/Guidelines.
2. It is, inter-alia, informed by you that:-
a. The present promoters group holding in BGL is 63.81%. The company had made reference to Board Industrial and Financial Reconstruction (BIFR) and BIFR has by its order dated 31.8.2004 sanctioned a scheme under Section 18 of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA) with cut off date as 1.4.2003.
b. As per the said scheme sanctioned by BIFR under Section 18(4) read with section 19(3) of SICA Act, 1985 the promoters have to infuse fresh capital of Rs 13 crores into the company. It is proposed to issue upto 84,41,558 shares of Rs 2.50 per share @ premium of Rs 12.90 per share against the fund of Rs 13 crore to be infused by the promoters.
c. As a result of the said infusion of equity shares, the promoters holding in BGL will increase to 81.49% as against 63.81% provided in the scheme based on the assumed price of Rs 10/- each as compared to Rs 15.40/- per share being the book value as per audited statements.
d. BIFR scheme also provides for the exemption from Section 81(1A) and other applicable provisions of Companies Act as also SEBI Guidelines to enable issue of share capital to promoters.
e. Regulation 3 of Takeover Regulations provide for non-applicability of regulations 10, 11 and 12 of the Takeover Regulations to schemes under Section 18 of the SICA, 1985.
f. An informal guidance has been sought on whether the Promoters and BGL can go ahead with the BIFR sanctioned scheme without any additional approvals from SEBI in respect of the same.
3. Without necessarily agreeing with your analysis, our views on the clarification sought by you are as follows:
4. It may be noted that as per regulation 3 (1)(j)(i) of the Takeover Regulations, the applicability of the provisions of regulations 10, 11 and 12 of Takeover Regulations are exempted to an allotment pursuant to a scheme framed under Section 18 of SICA.
4.1 However, exemption under the relevant clauses of sub-regulation (1) of regulation 3, shall be subject to compliance with requirement specified under regulation 11(2A) of Takeover Regulations which refers to limit specified in the Listing Agreement with the stock exchange for the purpose of listing on continuous basis. However, the conditions for continuous listing would not apply to companies referred to BIFR.
4.2 Further, you have stated that the BIFR vide its order dated 31.08.2004 had also exempted from the applicability of Section 81 (1A) and other applicable provisions of Companies Act, 1956, SEBI Guidelines to enable to issue share capital to promoters etc. It would follow that the promoters of BGL whose shareholding would increase from 63.81% to 81.49%, would be exempt from the applicability regulations 10,11 and 12 of Takeover Regulations and other applicable provisions of guidelines etc., if any..
4.3 In view of the above, as the instant issue pertains to a company which was referred to BIFR and shareholding of the Promoters will increase pursuant to a scheme sanctioned by BIFR, the provisions of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 and Clause 40 A of Listing Agreement would not apply.
5. This position is based on the representation made to the Department in your letter. Different facts or conditions might require a different result. This letter does not express decision of the Board on the questions referred.
6. You may note that the above views are expressed only with respect to the clarification sought on SEBI (Substantial Acquisition and Takeovers) Regulations, 1997 and Clause 40 A of Listing Agreement and do not affect the applicability of any other law or requirements.
Yours faithfully,
S V MURALI DHAR RAO