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Request for Interpretive Letter - Mahindra & Mahindra Ltd

Jan 20, 2004
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Informal Guidance

GENERAL MANAGER

DIVISION OF CORPORATE RESTRUCTURING

DCR/RC/15540/03

August 18, 2003

Mahindra & Mahindra Ltd.

Gateway Building

Appollo Bunder

Mumbai- 400001

Dear Sir,

 

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

 

Ref : Your letter dated July 15, 2003

  

Please refer to your letter cited above, seeking Interpretive Letter under SEBI (Informal Guidance) Scheme, 2003. The Interpretive letter sought on the issue as to whether the proposed sale by Punjab State Industrial Development Corporation (PSIDC) of its shares in Punjab Tractors Ltd. (PTL) amounts to a sale by a State Government in a Public Sector Undertaking within the meaning of Regulation 2(1)(cc) of SEBI (Substantial Acquisition of Shares And Takeovers) Regulations, 1997 {"the Regulations"}.

It is, inter-alia, informed by you that

     

  1. The Government of Punjab (GoP) has promoted Punjab State Industrial Development Corporation (PSIDC), a Government Company under section 617 of the Companies Act, 1956.

    2.  

  2. PSIDC invited offers for the acquisition of its entire equity stake, amounting to 23.49% in PTL to a strategic investor via a competitive biding process.

    3.  

  3. PSIDC has been mentioned as promoter in the prospectus for the IPO of PTL and PTL has been periodically filing disclosures under Regulation 8(3) of the Regulations stating that PSIDC is the person in control of PTL.

    4.  

  4. PSIDC / GoP is entitled to nominate 2 directors and Chairman on the Board of PTL.

    5.  

The department has examined the issue referred by you and it is observed that as per Regulation 2(1)(cc) of the Regulations "disinvestment" means the "sale by the Central Government or by the State Government as the case may be, of its shares or voting rights and/or control, in a listed Public Sector Undertaking". Further, in terms of Regulation 2(1)(ii) of the said regulations "Public Sector Undertaking" means "a company in which the Central Government or a State Government holds 50% or more of its equity capital or is in control of the company". On examination of the above issue and without necessarily agreeing with your analysis, as PSIDC holds only 23.49% in PTL and GoP (through PSIDC) is in control of PTL with Financial Institutions which hold 46.13%, PTL would not fall under the definition of PSU as defined under Regulation 2(1)(ii) of the Regulations.

Therefore, the proposed transaction in PTL cannot be said to be sale by a State Government in a Public Sector Undertaking within the meaning of Regulation 2(1)(cc) of the Regulations.

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 therefore, take opinion from any expert, if you desire.

 

Yours faithfully,

S V MURALI DHAR RAO