GENERAL MANAGER
DIVISION OF CORPORATE RESTRUCTURING
CFD/DCR/AG/ /05
August 10, 2005
The Paper Products Ltd.
LB Shashtri Marg,
Majiwade, P.Box no. 4,
Thane – 400 601.
Dear Sir,
Sub.: Request for Interpretive Letter under the SEBI (Informal Guidance) Scheme, 2003.
Ref.: Your letters dated 05.05.05 and 30.05.05 on the captioned subject
1. Please refer to your letters cited above, seeking Interpretive Letter under the SEBI (Informal Guidance) Scheme, 2003 (scheme) on the following two issues:
a. Will managing director of the company who alongwith his associates, holds only 2.78% in equity capital of the company, be construed as a PAC with the Foreign promoter as he is the nominee of the foreign promoter?
b. Can managing director of the company or any of his relatives acquire further shares without attracting the provisions of Regulations 10, 11 and 12 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (said Regulations)?
2. It is, inter-alia, informed by you that:-
a. The issued and paid-up capital of the company is Rs.12,53,74,380/- comprising of 1,25,37,438 equity shares of Rs.10/- each.
b. The company is a joint venture with Foreign Promoter holding 73,86,820 equity shares constituting 58.9% and the Indian Promoters holding 6,03,702 equity shares constituting 4.8% of the paid up capital of the company.
c. The managing director of the company who is also named as one of the Indian promoters is a nominee of the Foreign Promoter.
d. The managing director together with his associates, is holding 3,48,083 equity shares of the company constituting 2.78% of the paid-up capital of the company. He either directly or through his relatives, wishes to acquire further equity shares after complying with the SEBI (Prohibition of Insider Trading) Regulations, 1992.
e. Indian promoters and foreign promoters are both shown as persons in control in the disclosures made by the company under regulation 8(3) of the said Regulations to the stock exchanges.
3. Our comments with respect to the issues raised by you are as follows:
a. On the issue raised by you at para. 1(a): - In terms of regulation 2(1)(e) of the said Regulations the "person acting in concert" comprises of persons who, for a common objective or purpose of substantial acquisition of shares or voting rights or gaining control over the target company, pursuant to an agreement or understanding (formal or informal), directly or indirectly co-operate by acquiring or agreeing to acquire shares or voting rights in the target company or control over the target company.
It is observed that the managing director is shown as an Indian promoter and the company is a joint venture of the Indian promoter and the Foreign Promoter. It is also noted from your letters that as per the report under regulation 8(3) of the said Regulations submitted to the stock exchanges, the managing director is shown as Indian promoter of the company. In view of the same, the managing director of the company would be construed as a persons acting in concert with the Foreign Promoter.
b. On the issue raised by you at para. 1(b): In terms of regulation 11(2), of the said Regulations, an acquirer, who has already acquired, fifty five per cent or more but less than seventy five per cent of the shares or voting rights in a target company together with persons acting in concert with him, may acquire any additional share or voting rights either by himself or through persons acting in concert with him, only if he makes a public announcement under the provisions of the said Regulations.
It is observed that the promoter group, both Indian and Foreign is holding 79,90,522 (63.733%) equity shares in the company as on March 31, 2005. In view of the same, as per regulation 11(2) of the said Regulations, any additional acquisition by the managing director will require a public announcement to be made for acquiring shares or voting rights in accordance with the said Regulations. Therefore, the additional acquisition would attract regulation 11 (2) of the said Regulations.
4. This position is based on the representation made to the Division 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 by you.
5. You may note that the above views are expressed only with respect to the clarification sought on SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 and do not affect the applicability of any other law or requirements.
Yours faithfully,
S V MURALIDHAR RAO