GENERAL MANAGER
CORPORATION FINANCE DEPARTMENT
DIVISION OF CORPORATE RESTRUCTURING
Tel. (Board) : 22850451-56, 22880962-70
Fax : 22829520
CFD/DCR/AK/IG/69071/2006
June 12,2006
Sujana Universal Industries Ltd.,
18, Nagarjuna Hills,
Punjagutta,
Hyderabad- 500 082.
Dear Sir,
Sub.:- Request for Informal Guidance under Securities and Exchange Board of India (Informal Guidance) Scheme, 2003.
Ref: Your letter dated 10/04/2006
1.0 Please refer to your letter cited above seeking interpretive letter under the SEBI (Informal Guidance) Scheme, 2003.
2.0 It is, inter-alia, informed by you, vide your letter under reference that –
(a) Sujana Universal Industries Ltd.(SUIL) is a company registered under the Companies Act and having its shares listed in Hyderabad Stock Exchange Ltd. and Bombay Stock Exchange Ltd.
(b) SUIL would like to make preferential allotment of equity shares to its promoters, the persons acting in concert (PACs) with them and certain non- promoters. As a result of the proposed preferential allotment the shareholding of the promoters and PACs in SUIL is likely to come down to 14%.
(c) Since the shareholding of the promoters & PACs is going to be less than 15%, whether the promoter & PACs need to make an open offer under SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 1997 {the Takeover Regulations} if they desire to acquire further equity shares either by way of fresh allotment or open market purchases. SUIL feels that since the change in the shareholding of the promoters & PACs will be because of increase of share capital as a result of proposed preferential allotment and not because of any buying or selling of equity shares of SUIL by the promoters/ PACs there is no need of making open offer on reaching the threshold limit of 15% and they can acquire the equity shares under regulation 11 of the Takeover Regulations as per the creeping acquisition limit.
3.0 In light of your aforesaid submissions, you have sought interpretative letter on the following:-
a) Whether the the promoters of SUIL and persons acting in concert with them can acquire further shares as per the creeping acquisition limit in accordance with regulation 11 of the Takeover Regulations and there is no need of open offer to acquire shares beyond 15% in case of fall in their shareholding to less than 15% as a result of the proposed preferential issue of equity shares.
4.0 Without necessarily agreeing with your analysis our views on the on the issue raised by you are as under:-
a) Reguation 10 of the Takeover Regualtions provides that no acquirer shall acquire shares or voting rights which (taken together with the shares or voting rights if any, held by him or by persons acting in concert with him), entitle such acquirer to exercise 15% or more of the voting rights in the target company unless such acquirer makes the public announcement to acquire shares of such target company in accordance with the regulations. These regulations apply in case of acquisition of 15% or more of shares or voting rights.
b) Regulation 11 (1) of the Takeover Regulations provides that no acquirer who, together with persons acting in concert with him has acquired, in accordance with the provisions of law, 15% or more but less than 55% of the shares or voting rights in the target company shall acquire additional shares or voting rights entitiling him to exercise more than 5% of the voting rights in any financial year unless such acquirer makes a public announcement to acquire shares in accordance with the regulations. This regulation deals with consolidation of holdings. The creeping limit or the requirement of public announcement under this regulation is applicable in case of an acquirer who holds 15% or more but less than 55% of the shares or voting rights in the target company.
c) In respect of the facts as represented in your letter under reference, Regulation 10 or 11 of the Takeover Regulations would not be attracted in respect of the proposed preferential allotment as pursuant to the proosed preferential allotment the shareholding of the promoters alongwith the shareholding of the persons acting in concert would be decreased to 14% of the share or voting rights in SUIL.
d) However, in case of any further acquisition of shares either by way of fresh allotment or open market purchases to or by the promoters or PACs, regulation 10 would be attracted if the said acquisition entitles the promoters and PACs to exercise 15% or more of the voting rights in SUIL. The creeping limit provided in regulation 11 (1) shall not be applicable in respect of such acquisition as the shareholding of the promoters alongwith PACs with them would be less than 15%.
5.0 This position is based on the representation made to the Division in your letter under reference. Different facts or conditions might require a different result. This letter does not express decision of the Board on the questions referred.
6.0 Please note that this position is only with respect to applicability of the Regulations 10 and 11 of the Takeover Regulations and does not affect applicability of any law and other SEBI Regulations, Guidelines and circulars administered by SEBI or any other authority.
Yours faithfully,
S.V. Murali Dhar Rao