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 6, 2004
Alembic Glass Industries Limited
Alembic Road,
Baroda – 390 003
Dear Sirs,
Sub.: Request for Interpretive Letter under the SEBI (Informal Guidance) Scheme, 2003
Ref: Your letters dated July 19, 2004 and August 10, 2004
1. Please refer to your letters cited above, seeking interpretive letter under SEBI (Informal Guidance) Scheme, 2003. The Interpretive letter is sought on the issue as to whether the allotment upto 67,000 equity shares by Alembic Glass Industries Limited (hereinafter referred to as ‘AGIL’) to the Promoter Group by way of preferential allotment whereby the voting rights of the promoters will increase by 4.68%, would attract the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 {hereinafter referred to as ‘the said Regulations’}.
2. It is, inter-alia, informed by you that:-
- AGIL is a listed company wherein the shareholding of the Promoter Group is 66.88%.
- AGIL had convened the Board of Directors meeting on July 19, 2004 wherein the Board approved the proposal for preferential allotment upto 67,000 equity shares to Promoter Group. The said allotment is subject to the approval of members’ approval by way of special resolution in terms of Section 81(1A) in an Annual General Meeting to be held on August 18, 2004.
- As a result of the proposed acquisition, the share capital of AGIL shall increase from 4, 06,785 shares to 4,73,785 shares.
- The aforesaid issue of 67,000 shares shall amount to 14.14% of the post-issue equity share capital of AGIL.
- The post acquisition shareholding of the Promoter Group would be 71.56% resulting in an increase in shareholding of 4.68%.
- There was an inter-se transfer of 2,413 shares (0.59% of pre-issue share capital) between promoters Shri C R Amin and Smt S R Mukherjee during the current financial year 2004-2005.
- The promoter group is already in control of AGIL and pursuant to the aforesaid proposed acquisition, there would not be any change in the control over AGIL.
- The query was whether the acquisition of shares on preferential basis as stated above would make the Promoter Group liable to make a open offer in terms of ‘the said Regulations’.
3. In view of the above query, the reference is drawn to the provisions of the Regulation 11(1) of ‘the said Regulations’, which provides as under:-
“11 (1) No acquirer who, together with persons acting in concert with him, has acquired, in accordance with the provisions of law, [15 per cent or more but less than 75 per cent] of the shares or voting rights in a company, shall acquire, either by himself or through or with persons acting in concert with him, additional shares or voting rights entitling him to exercise more than [5%] of the voting rights, [in any financial year ending on 31st March], unless such acquirer makes a public announcement to acquire shares in accordance with the Regulations.”
4. The aforementioned regulation provides that no acquirer can acquire additional shares or voting rights, entitling him to exercise more than 5% of the voting rights in one financial year unless he makes a public announcement to acquire the shares of the target company in accordance with the Regulations. This shows that the intent of regulation 11(1) of the said Regulations is to consider the incremental shareholding/voting rights acquired by the acquirer while examining the applicability or otherwise of the said Regulations.
5. Without necessarily agreeing with your analysis, it is observed from your submissions that pursuant to the proposed acquisition, the promoters along with persons acting in concert with them would acquire only 4.68% additional voting rights in AGIL. However, as Shri C R Amin, one of the promoters, had already acquired 0.59% shares in the current financial year, the same has to be taken into consideration while determining the creeping acquisition limit. Therefore, considering the fact that 0.59% shares was already acquired by the Promoter Group as mentioned above , the total number of shares acquired during the year 2004-2005 would exceed the permissible creeping acquisition limit of 5% as provided under regulation 11(1) of the said Regulations i.e, (0.59% + 4.68% = 5.27%).
6. As the proposed acquisition of shares would exceed the creeping acquisition limit of 5%, the proposed acquisition would be covered under regulation 11(1) of ‘the said Regulations’,
7. Therefore, prima facie the provisions of regulation 11(1) of ‘the said Regulations’ is applicable in the proposed acquisition and the acquirer i.e the promoter group is liable to make an open offer as provided under ‘the said Regulations’.
8. 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.
9. 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 requirements.
Yours faithfully,
S V MURALI DHAR RAO