GENERAL MANAGER
CORPORATION FINANCE DEPARTMENT
DIVISION OF CORPORATE RESTRUCTURING
Tel. (Board): 22850451-56, 22880962-70
Fax : 22829520
CFD/DCR/AK/IG/ /2004
December 3, 2004
Kanishk Steel Industries Ltd.,
No. 26, (Old 17), 2nd floor,
Mooker Nalla Muthu Street,
Chennai – 600 001.
Dear Sir,
Sub.:- Request for Informal Guidance under Securities and Exchange Board of India (Informal Guidance) Scheme, 2003.
Ref : Your letter dated November 09, 2004
Please refer to your letter referred above seeking “interpretive letter” under the SEBI (Informal Guidance) Scheme, 2003, in respect of proposed preferential allotment of shares by Kanishk Steel Industries Limited.
It is, inter-alia, informed by you that-
i) Kanishk Steel Industries Limited (hereinafter referred to as “the company”) is a BSE listed manufacturing company proposing to go in for expansion through allied activities. The company is presently in Z category.
|
|
No. of shares
|
%
|
Capital (Rs.)
|
|
Paid up capital
|
1,06,74,000
|
100
|
10,67,40,000/-
|
|
Promoters and PAC equity
|
74,23,767
|
69.55%
(say 70%)
|
7,42,37,670
|
ii) The company is proposing to issue shares on preferential basis under Chapter XIII of SEBI DIP Guidelines, as under:
Promoters (only to PACs) 64,00,000
Others 16,00,000
Total to be issued 80,00,000
iii) The proposed 64,00,000 shares in the promoters & PAC category is proposed to be given to the person acting concert as under :
|
Name
|
% of shares to the post issue
|
No. of shares
|
|
A
|
10.71%
|
20,00,000
|
|
B
|
10.71%
|
20,00,000
|
|
C
|
12.85%
|
24,00,000
|
|
|
Total
|
64,00,000
|
iv) All the above persons/entities are new shareholders and are not holding any shares at present.
The post issue shareholding pattern will be as under:
|
|
No. of shares
|
%
|
Capital (Rs.)
|
|
Paid up capital
|
1,86,74,000
|
100
|
18,67,40,000/-
|
|
Promoters and PAC equity
|
1,38,23,767
|
74.02%
|
13,82,37,670/-
|
v) In the above mentioned proposal for preferential issue, the three acquirers are not holding any shares at present and they will be acquiring shares limiting themselves within 15% and therefore comply with regulation 10 of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997.
vi) The promoters and PACs put together are in the 15% less than 75% category. After the preferential issue, the share holding of promoters & PACs will still be less than 75% (i.e. 74.02%). No existing shareholder is acquiring any shares or voting rights more than 5%.
3. In view of the above facts, you have sought clarifications on the following:
a) Under the circumstances, whether in the above said proposal, provisions of Regulation 10 and 11 of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 are attracted or not.
b) Whether the acquirers have to make public announcement for acquiring the shares.
c) Whether the company can allot the shares, after complying with all other provisions of SEBI (Disclosure & Investor Protection) Guidelines, 2000 on preferential issue and the company can confirm that the proposed preferential issue and allotment of shares does not require the acquirer to make an open offer under the regulations.
4. Without necessarily agreeing with your analysis, the following is stated in response to your clarifications;
a) Since the promoters of Kanishk Steel Industries Limited and persons acting in concert are already holding 69.55% shares regulation 10 of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, (said Regulations) shall not be applicable. After the preferential allotment of 80,00,000 shares, the shareholding of the promoters and acquirers (who will also be Persons Acting in Concerts) shall increase to 74.02%, of the post paid capital of the said company, an increase of 4.47% which is less than the creeping limit specified under regulation 11(1) of the said Regulations. Hence, regulation 11(1) of the said Regulations shall also not be applicable.
b) In view of the above, the acquirers in the proposed preferential allotment are not required to make public announcement under the said Regulations.
c) The company may confirm that the proposed preferential issue and allotment of shares does not require the acquirer to make an open offer under the said Regulations. However, they shall comply with other requirements, namely SEBI (Disclosure & Investor Protection) Guidelines, 2000 and the provisions of Companies Act, 1956.
5. 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.
6. You may note that the above views are expressed by this Division only with respect to the clarifications sought on SEBI (Substantial Acquisition and Takeovers) Regulations, 1997 and do not affect the applicability of any other law or requirements.
Yours faithfully,
S.V. Murali Dhar Rao