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Request for no-action/interpretative letter - Shriram Investments Ltd

Jan 20, 2004
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Informal Guidance

GENERAL MANAGER

DIVISION OF CORPORATE RESTRUCTURING

DCR/AG/ 19785 /03

October 9, 2003

Shriram Investments Limited.

101-105, Shiv Chambers,

1st Floor, B Wing,

Sector -11,

C.B.D Belapur,

Navi Mumbai – 400 614

Sub: Request for no-action letter/interpretative letter under the SEBI (Informal Guidance) Scheme, 2003

 

 

Ref : Your letter dated August 18, 2003 and September 18, 2003

 

 

  

  1. Please refer to your letters cited above, seeking No action Letter under SEBI (Informal Guidance) Scheme, 2003. The No- action letter sought on the issue as to whether the proposed acquisition of 3,86,92,350 (9.82%) shares by Nederlandse Financierings – Maatschappji voor Ontwikkelingslanden N V (FMO) in Shriram Investments Limited. (SIL) is in conformity with all the SEBI (Substantial Acquisition of Shares And Takeovers) Regulations, 1997 {"the Regulations"}.

    2.  

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

    3.  

  1. SIL is a public limited company which is listed in BSE, MSE, BgSE and ASE in which the Indian public is holding 65.45%.

    2.  

  2. Shriram Construction Finance and Shriram Motor Finance, who are the existing shareholders of SIL are desirous of en-bloc sale of their shareholdings constituting 9.82%. For this they have identified a prospective purchaser in FMO, a Finance Company based in Netherlands, with 50% of its stake being held by the Netherlands Government.

    3.  

  3. FMO would be acquiring the aforesaid shares purely by way of investment and would not be seeking control over the affairs of the target company. In this regard, suitable clause would be incorporated in an agreement to be entered into between FMO, the sellers and SIL.

    4.  

  4. The proposed acquisition of shares by FMO would be subject to the approval of the Foreign Investment and Promotion Board of India (FIPB) and necessary applications would be made to FIPB for their clearance/approval for the purchase of the said shares.

    5.  

  5. FMO and the SIL shall comply with Regulation 7 of the Regulations.

    6.  

  1. Without necessarily agreeing with your analysis, it is observed from your submissions that as FMO proposes to acquire only 9.82% shares in SIL, which is less than the threshold limit of 15% in terms of Reg. 10 the captioned Regulations, the provisions of Regulation 10 may not be attracted.

    2.  

  2. As regards Regulation 12, it is noted that pursuant to the proposed acquisition, the control of SIL shall continue to vest in the promoters of the company and there would not be any change in the control over the Board of Directors. Further, a Shareholders Agreement shall be entered into between FMO and the sellers and SIL along with the promoters of SIL including a clause to this effect. In view of the above, as there would not be any change in control over the affairs of SIL, the provisions of Regulation 12 may not be attracted.

    3.  

  3. However, FMO and SIL are advised to ensure compliance with the provisions of Regulation 7 of the Regulations.

    4.  

  4. This position is based on the representation made to the Division 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.

    5.  

  5. 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.

    6.  

Yours faithfully,

S V MURALI DHAR RAO