Request for Interpretive Letter - Jain Irrigation Systems Limited

 

GENERAL MANAGER

DIVISION OF CORPORATE RESTRUCTURING

DCR/MM/04/1070

January 16, 2004

Jain Irrigation Systems Limited

Jain House, 41-43,

Police Court Lane, Fort,

Mumbai – 400 001

 

Dear Sirs,

 

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

 

Ref : Your letters dated December 2, 2003 and December 11, 2003

 

1. Please refer to your letters quoted above, seeking ‘Interpretative Letter under SEBI (Informal Guidance) Scheme, 2003. The Interpretive letter is sought on the issue as to whether for applying regulation 11 of the SEBI (Substantial Acquisition of Shares And Takeovers) Regulations, 1997 {"the Regulations"} the comparative percentage of holdings in the pre acquisition and post acquisition equity share capital should be applied and whether the proposed acquisition as summarized under will be within the limit specified in regulation 11.

 

2. It is, inter-alia, informed by you that:-

 

Jain Irrigation Systems Limited (JISL) is a listed company with Members of the Jain family (ie, the promoter group) holding 34.41%, Aqua-India I Ltd and Aqua-India II Ltd (i.,e the Aqua Group) holding 49.40% and other investors holding 16.19% in the company.

 

JISL convened an EGM on November 17, 2003 and the shareholders approved a special resolution proposing preferential allotment to the Promoters group and the Aqua Group.

 

As per the said resolution, 29,63,300 shares are proposed to be allotted to the Promoters and 28,93,000 shares to the Aqua group. As a result of the proposed acquisition, the equity share capital of JISL shall increase from 4,78,86,303 shares to 5,37,42,603 shares.

 

Currently, the Promoters hold 34.17% and the Aqua Group hold 49.4% in JISL and the two groups are not acting in concert with each other.

 

The additional shares acquired by Promoters and Aqua group would be 1.76% {36.17% less 34.41%} and Nil% respectively.

 

3. Reference is drawn to Regulation 11(1) of the Regulations, which states as under:-

 

 "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."

 

1. From the above regulation it appears that an acquirer can acquire only upto 5% additional voting rights in one financial year without making a public announcement to acquire the shares of the target company in accordance with the Regulations. The intent of the Regulations is to consider the incremental voting rights acquired by the acquirer while examining the applicability of the Regulations.

 

2. Without necessarily agreeing with your analysis, it is observed from your submissions that pursuant to the proposed acquisition, the promoters will acquire 1.76% additional voting rights and the Aqua group will not be acquiring any additional voting rights. Considering the shareholding of groups individually, both the acquisitions will be within the creeping acquisition limit of 5% and therefore, the acquirers shall not be attracting the provisions of Regulation 11(1) of the Regulations.

 

3. This interpretation is based on the representation made to the Division in your letter quoted above. Different facts or conditions might require a different result. This letter does not express decision of the Board on the questions referred in your letter.

 

4. 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.

 

Yours faithfully,

 S V MURALI DHAR RAO