GENERAL MANAGER
DIVISION OF CORPORATE RESTRUCTURING
Tel: 91-22-22823886
Fax: 91-22-22829520
Email:mdrao@sebi.gov.in
CFD/DCR/TO/MM/ /04
December 09, 2004
Allianz Securities Limited
2nd Floor, 3 Scindia House,
Janpath,
New Delhi – 110 001
Dear Sirs,
Sub.: Request for Guidance Letter under the SEBI (Informal Guidance) Scheme, 2003
Ref: Your letters dated September 20, 2004 October 30, 2004
1.0 Please refer to your letters cited above, seeking Interpretive Letter under SEBI (Informal Guidance) Scheme, 2003. The interpretive letter has been sought on the issue as to –
(i) Whether the proposed acquisition of 31.39% shares by Mr. Navjeet Singh Sobti and Innovative Money Matters Private Limited from Allianz Capital & Management Services Limited in Allianz Securities limited {target company} would be exempt from the applicability of the SEBI (Substantial Acquisition of Shares And Takeovers) Regulations, 1997 {“the Regulations”} in terms of Regulation 3(1) (e) (iii)(b) of the Regulations?
(ii) If the inter se transfer is made at a price of Rs. 11/- per share, which is not exceeding 25% of the price determined as per Regulation 20 (5) of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, whether the said inter se transfer among the promoters would be covered under Reg. 3 (1) (e) (iii) (b) and accordingly would not trigger Regulations 10, 11 and 12 of the Regulations?
(iii) Whether the said inter se transfer would attract Regulations 10, 11 and 12 only by considering the fact that the shares of the Company are infrequently traded and the share price in the market quotes at around Rs. 3/- to Rs. 4/-?
2.0 It is, inter-alia, informed by you that:-
- Allianz Securities limited {target company} is a public limited company listed at the Bombay Stock Exchange and the Delhi Stock Exchange.
- The promoters of the target company, comprising of Shri Navjeet Singh Sobti, Ms. Gurpreet Sobti, Allianz Capital & Management Services Ltd, Innovative Money Matters Pvt Ltd and Others are holding 47% of the total voting capital of the target company.
- Shri Navjeet Singh Sobti proposes to increase his shareholding in the target company, either directly or through Innovative Money Matters Private Limited by way of inter se transfer from Allianz Capital And Management Services Limited {“transferor”}, another promoter of the target company.
- Pursuant to the proposed inter se acquisition of shares, the shareholding of the Shri Navjeet Singh Sobti along with persons acting in concert (PACs) with him {“Acquirers”} would increase from 10.61% to 42% in the target company.
- There will not be any change in control over the target company pursuant to the aforesaid proposed acquisition.
- The proposed acquisition would be to fulfill one of the conditions for admission of the target company as one of members of the National Stock Exchange (NSE).
3.0 Our views on the queries raised by you vide para 1.0 above are as under:-
3.1 Regarding query at 1.0 (i)
a. As per Reg. 3(1)(e)(iii) (b) of the Regulations, acquisition pursuant to transfer of shares amongst Promoters is eligible for exemption from the applicability of the Regulations 10, 11 and 12 of the Regulations subject to the acquirer complying with the following conditions.
i. The transferor(s) and transferee(s) are promoters in terms of provisions of Regulation 2(1)(h) of the Regulations.
ii. The transferees collectively as well as transferors collectively have been holding shares in the target company for a period of atleast three years prior to the date of acquisition.
iii. The provisions of Chapter II of the Takeover Regulations have been complied within the specified time-limit by both the transferees and transferors.
iv. The inter se transfer price should not exceed 25% of the price determined in terms of Regulations 20(4) and 20(5) of the Regulations.
v. As required under Regulation 3(3) of the Regulations, the transferee (Acquirer) should inform the stock exchanges at least 4 working days in advance of the date of proposed acquisition in case of acquisition exceeding 5% of the voting share capital of the target company.
vi. The transferee (Acquirer) shall file a report with SEBI in the specified format within 21 days of the date of acquisition along with requisite fees prescribed, in terms of Regulations 3(4) and 3(5) of the Regulations.
(b). It is observed that Acquirers and the transferor are promoters of the target company in terms of Regulation 2(1) (h) of the Regulations and they have been holding shares in the target company for the last three years. Further, both Acquirers and transferor have complied with the provisions of regulations 6, 7 and 8 within the stipulated time in the Regulations.
3.1.1 Without necessarily agreeing with your analysis, it is observed that proposed acquisition of 31.39% shares of the target company by Acquirers would be eligible for exemption from the applicability of the provisions of Regulations 10, 11 and 12 of the captioned Regulations subject to other conditions as specified at 3.1 (a) (iv) and (v) and the Acquirer shall also be under obligation to file the report in terms of regulation 3 (4) read with regulation 3 (5) of the Regulations as mentioned at 3.1 (a) (vi) above.
3.2 Regarding query 1.0 (ii) and (iii)
3.2.1 It appears from your letters under reference that the price of the shares proposed to be acquired under the proposed acquisition is to be determined as per regulation 20 (5) of the Regulations and the same would be Rs. 11/- per share.
3.2.2 (a). In our view, for satisfying the conditions stipulated in Explanation (1) to Regulation 3 (1) (e) (iii) (b) the price of the shares acquired through inter se transfer between promoters should not exceed 25% of the price determined in terms of Regulations 20(4) and 20(5) of the Regulations.
(b). The price has to be determined with reference to the date of acquisition in terms of regulations 20 (4) and 20 (5) of the Regulations. Therefore, it may not be possible to comment upon the status of compliance with the provisions of Explanation (1) to the Regulation 3(1) (e) (iii) (b) of the Regulations at this stage.
4.0 This position is based on the representation made to the Division in your letters under reference. Different facts or conditions might require a different result. This letter does not express decision of the Board on the questions referred.
5.0 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 do not affect the applicability of any other law or requirement.
Yours faithfully,
S V MURALI DHAR RAO