GENERAL MANAGER
CORPORATION FINANCE DEPARTMENT
DIVISION OF CORPORATE RESTRUCTURING
CFD/DCR/TO/MM/ /04
June 1, 2004
The Supreme Industries Limited
612, Raheja Chambers
Nariman Point
Mumbai - 400021
Dear Sirs,
Sub.: Request for Interpretive Letter under the SEBI (Informal Guidance) Scheme, 2003
Ref: Your letter dated May 5, 2004
1. Please refer to your letter cited above, seeking interpretive letter under SEBI (Informal Guidance) Scheme, 2003. The Interpretive letter is sought on the issue as to whether the allotment of 10,00,000 (10 lakhs) equity shares and/or warrants/like securities by the Supreme Industries Limited to the existing promoters whereby the voting rights of the promoters will increase by 4.04% will attract the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 {hereinafter referred to as “Regulations”}.
2. It is, inter-alia, informed by you that:-
a. The Supreme Industries Limited (SIL) is a listed company. Presently the promoters’ holding is 50,36,512 equity shares representing 38.57% voting rights. The Persons Acting in Concert with Promoters hold 6,10,137 equity shares representing 4.67% of the total equity and voting rights. Thus the aggregate of the promoters’ holding together with that of the persons acting in concert is 43.24%.
b. SIL convened EGM on May 11, 2004 and the shareholders approved a special resolution under Section 81(1A) of the Companies Act, 1956 proposing preferential allotment to the existing Promoters.
c. As per the said resolution 10,00,000 (ten lacs) equity shares/ or warrants/ like securities entitling the holders to apply for one equity share for each warrant and/or like security convertible into equity shares are proposed to be allotted to the Promoters. As a result of the proposed acquisition, the share capital of SIL shall increase from 1,30,57,837 shares to 1,40,57,837 shares.
d. Consequent to the said allotment the voting rights of the promoters and the persons acting in concert with them shall increase by 4.04% of the post issue capital of SIL.
3. Reference is drawn to the provisions of the Regulation 11(1) of the Regulations, which provides as under:-
“11 (1) 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.”
4. The aforementioned Regulation provides that no acquirer can acquire additional shares or voting rights, entitling him to exercise more than 5% of the voting rights in one financial year unless he makes a public announcement to acquire the shares of the target company in accordance with the Regulations. This shows that the intent of the Regulations is to consider the incremental shareholding/voting rights acquired by the acquirer while examining the applicability or otherwise of the Regulations.
5. Without necessarily agreeing with your analysis, it is observed from your submissions that pursuant to the proposed acquisition, the promoters along with persons acting in concert with them will acquire 4.04% additional voting rights in SIL in a financial year. Considering the shareholding of the promoters along with persons acting in concert, the acquisition would 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.
6. In case, the shares and other convertible instruments are allotted to the promoters and persons acting in concert with them and the voting rights of the promoters and persons acting in concert with them pursuant to allotment of shares and conversion of the convertible instruments into equity shares increases to more than 5% of the voting rights in SIL in a financial year, the regulation 11(1) shall be attracted.
7. 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.
8. 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 requirements.
Yours faithfully,
S V MURALI DHAR RAO