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Request for Clarification - Cholamandalam Investment & Finance Company Ltd

Jan 20, 2004
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Informal Guidance

GENERAL MANAGER

DIVISION OF CORPORATE RESTRUCTURING

DCR/RC/ 796 /04

January 12, 2004

Cholamandalam Investment & Finance Company Ltd

TIAM House, 2nd Floor

72 Rajaji Salai

Chennai – 600 001

 

 

Dear Sir,

 

 

Sub.: Request for Clarification under the SEBI (Informal Guidance) Scheme, 2003

 Ref : Your letter dated November 21, 2003

 

Please refer to your letter cited above, seeking clarification under SEBI (Informal Guidance) Scheme, 2003. Clarification is sought on the issue as to whether exemption from the provisions of Regulation 7 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 {Regulations"}, is applicable to you by the virtue of being a financial institution as per the RBI Act, 1934. Further, you have also sought clarification regarding additional requirements of compliance under the Regulations apart from the disclosure requirement u/r 7 in case the exemption is not applicable.

 

It is, inter-alia, informed by you that

 

  1. Cholamandalam Investment & Finance Company Ltd. (CIFCO) is a non-banking finance company registered with the RBI and classified as a Hire Purchase and Equipment Leasing Company.

    2.  

  2. CIFCO provides finance against shares and shares are pledged with them as security for the financial facility extended.

    3.  

  3. In one such transaction, CIFCO has recently extended finance against the shares of a listed public limited company and the pledged shares in this transaction accounts to 29% of the share capital of the company.

    4.  

The words ‘financial institution’ used in Explanation to regulation 7 may be referred to as ‘public financial institution’ as defined in regulation 2(1)(i) of the Regulations.

On the basis of the facts supplied by you, it is clarified that though CIFCO is regarded as a financial institution under the provisions of the RBI Act, 1934, CIFCO cannot be regarded as a financial institution in terms of the provisions of the Regulations and hence is not exempt from the provisions of the Regulations. It is further clarified that unless otherwise exempt under the Regulations, all other applicable provisions of the Regulations would apply to CIFCO.

This position is based on the representation made to the Department 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.

 

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 including FIPB requirements.

 

Yours faithfully,

S V MURALI DHAR RAO