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Request for clarification - Grasim Industries Ltd

Jan 20, 2004
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Informal Guidance

GENERAL MANAGER

DIVISION OF CORPORATE RESTRUCTURING

DCR/AT/ 18613 /03

September 30, 2003

Grasim Industries Limited

91,Sakhar Bhavan

230, Nariman Point

Mumbai – 400 021

Dear Sir/s,

 

Sub : Clarification under SEBI ( Informal Guidance) Scheme, 2003 – Grasim Industries Ltd.

  

Please refer to your letter dated 23.09.03 and other correspondences exchanged on the captioned subject.

In view of the facts set forth in your aforesaid letter and in terms of paragraph 7 of the Guidance Scheme, we advise as under in relation to the issues raised:

  1. "That the provisions of the Takeover Code are not applicable to the Open Offer being made by Grasim in terms of the Scheme of Arrangement (prior to the listing of the shares of CemCo) in view of Regulations 3(1)(j) and (k) of the Takeover Code."

    2.  

    Comments

    The acquisition by Grasim of the shares of the unlisted Target Company i.e. CemCo in terms of the Scheme of Arrangement prior to the listing of shares of CemCo would be exempt u/r 3(1)(j)(ii) & (k) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.  

     

  2. "That, in the event, the Open Offer was being made under the Takeover Code (which is not the case), the FIs would not by reason of the Support Arrangement (as described in 5 above) qualify as "persons acting in concert" with Grasim under the Takeover Code and hence, in any view of the matter, would be free to participate in the Open Offer made under the Scheme of Arrangement."

    3.  

    Comments

    For the purpose of open offer, FIs would not be treated as person acting in concert with Grasim, the acquirer, as FIs are going to participate in the open offer to sell their securities to Grasim.

     

  3. "That, by virtue of the FIs providing the Support Arrangement (as described above), the FIs are not in contravention of any of the provisions of the Securities Contract (Regulation) Act, 1956 ("SCRA"), and in particular, the decision of the FIs to tender in the Open Offer under the Scheme of Arrangement is not a forward contract and is not hit by Section 16 of the SCRA and would not be considered as a negotiated deal."

    4.  

Comments:

"Section 16 of SC(R ) Act read with SEBI notification dated 1.3.2000 prohibits entering into an agreement or forward contract in respect of listed and marketable securities otherwise than as per the byelaws of the stock exchange or provision of SC(R ) Act ."

That, by virtue of the FIs providing the Support Arrangement as described in your letter dated 23.09.03 and particularly, in view of the fact that their concurrence for participation in the Open Offer will form part of the Scheme of Arrangement to be approved by the High Court, it is opined that the support Arrangement shall not be hit by Section 16 of the SCRA and would not be considered as a negotiated deal.

(d) "That the arrangement in relation to the sale and purchase of the CemCo Shares and the L&T Shares respectively as set out in paragraph 4(b) above which shall be provided for and implemented in terms of the Scheme of Arrangement is not a forward contract and is not in contravention of Section 16 of the SCRA."

Comments:

That the arrangement in relation to the sale of L & T shares (i.e. after de-merger of the Cement Undertaking) by Grasim to L & T Employee Welfare Trust and purchase of the CemCo Shares by Grasim respectively as set out in paragraph 4(b) of the letter which shall be provided for and implemented in terms of the Scheme of Arrangement to be approved by the High Court is not in contravention of Section 16 of the SCRA

(e) "That the transfer of the CemCo Shares to Grasim in terms of the Scheme (including release from escrow) would not attract the provisions of the Takeover Code, and Grasim would not be required to make a further open offer under the provisions thereof."

Comments

The transfer of the CemCo Shares to Grasim in terms of the Scheme (including release from escrow) would not attract the provisions of the Takeover Code, and Grasim would not be required to make a further open offer under the provisions as it would be exempt u/r 3(1)(j)(ii) of the SEBI (SAST) Regulations.

This position is based on the representation made to the Department /Division in your letter dated 23.9.03 and particularly on the assumption that the proposed Scheme of Arrangement shall be approved by the High Court. Different facts or conditions might require a different result. This letter expresses the Department/Division’s view on enforcement action only. It does not express decision of the Board on the questions presented.

 

Yours faithfully,

S V MURALI DHAR RAO