Feb 06, 2004
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Informal Guidance
Deputy General Manager
Market Regulation Department – Policy
Email:-sundaresanvs@sebi.gov.in
Tel : 22164465; Fax: 22164482
SEBI/MRD/IGS/AT/2575/2004
February 6, 2004
Shri R Y Patil
General Manager
Legal Affairs-Company Secretary
Zuari Industries Ltd.
Jaikisaan Bhawan
Zuari Nagar
Goa – 403 726.
Sub: Request for Interpretive Letter under the SEBI (Informal Guidance) Scheme, 2003
Ref : Letter dated December 16, 2003 for and on behalf of Zuari Industries Ltd (ZIL)
Dear Sir,
1. Please refer to the letter quoted above, seeking ‘Interpretive Letter’ under SEBI (Informal Guidance) Scheme, 2003. The Interpretive letter is sought on the issue as to –
a. whether the preference share proposed to be issued by Zuari Industries Ltd. (ZIL) would be deemed to be a debt security for the purpose of the applicability of the SEBI circulars dated September 30, 2003 and December 22, 2003?
b. whether the provisions of SEBI circular No. SEBI/MRD/SE/AT/36/2003/30/09 dated September 30, 2003 would be applicable to the aforesaid issue of preference shares on private placement basis?
c. whether such preference shares proposed to be issued by ZIL on private placement basis will be eligible for listing on stock exchanges ?
2. It is, inter-alia, informed by you, vide the letter under reference, that –
(i). ZIL (formerly known as Zuari Agro Chemicals Ltd.) is proposing to raise funds by issuing listed redeemable preference shares on a private placement basis to various investors not exceeding 49 in number.
(ii). The listing of preference shares so issued by ZIL will also be in compliance with clause 24 of the Listing Agreement with the stock exchanges whereby any new issue of securities being made by ZIL is required to be listed on the stock exchanges.
(iii). The preference shares are not debt securities and SEBI circular No. SEBI/MRD/SE/AT/36/2003/30/09 dated September, 30, 2003 is applicable to debt securities and not preference shares.
3. Without necessarily agreeing with your analysis, it is observed from your submissions that the ZIL is proposing to issue preference shares and not the debt securities covered under SEBI circular No. SEBI/MRD/SE/AT/36/2003/30/09 dated September, 30, 2003. As regards the queries raised vide your aforesaid letter and listed in para 1 hereof, our interpretation is as under –
a. The SEBI circular No. SEBI/MRD/SE/AT/36/2003/30/09 dated September, 30, 2003 and SEBI/MRD/SE/AT/46/2003 dated December 22, 2003 have been issued regarding listing of debt securities issued by a company. The circulars, inter alia, provide for condition regarding credit rating, appointment of debenture trustee and relaxation from strict enforcement of rule 19 (2) (b) of the Securities Contracts (Regulation) Rules, 1957 [SC (R)R], etc. These circulars apply to listing of debt instruments issued on private placement basis. The preference shares proposed to be issued by ZIL would not be deemed to be a debt security for the purpose of applicability of the provisions of the SEBI circulars dated September 30, 2003 and December 22, 2003 and consequently the provisions of the circulars dated September 30, 2003 and December 22, 2003 will not be applicable to the preference shares proposed to be issued by ZIL.
b. If the ZIL desires to get its preference shares proposed to be issued listed on the stock exchanges, it has to satisfy the concerned stock exchange about compliance with listing conditions of the respective stock exchange/s, where such preference shares are proposed to be listed, and compliance with rule 19 of the SC(R) R, i.e., regarding public offer, etc.
4. As desired by ZIL, this letter will not be made available to the public for a period of 90 days from the date of this letter.
5. The above clarifications are based on the representation made to the Department in your aforesaid 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 applicability of SEBI circulars SEBI/MRD/SE/AT/36/2003/30/09 dated September, 30, 2003 and SEBI/MRD/SE/AT/46/2003 dated December 22, 2003 and do not affect the applicability of any other law.
Yours faithfully,
V S SUNDARESAN