1. Home
  2. »
  3. Enforcement
  4. »
  5. Informal Guidance

Request for Informal Guidance under Securities and Exchange Board of India (Informal Guidance) Scheme, 2003

Mar 02, 2005
|
Informal Guidance

GENERAL MANAGER

CORPORATION FINANCE DEPARTMENT

DIVISION OF CORPORATE RESTRUCTURING

Tel. (Board) : 22850451-56, 22880962-70

Fax : 22829520

CFD/DCR/AK/IG/ 35026/2005

March 2, 2005

Central India Industries Limited,

Vidyarthi & Sons,

3-L, Gandhi Nagar,

Gwalior

 

Dear Sir,

 

Sub.:- Request for Informal Guidance under Securities and Exchange Board of India (Informal Guidance) Scheme, 2003.

 

Ref : Your letter dated 25.08.04

 

1.0             Please refer to your letter cited above seeking interpretive letter under the SEBI (Informal Guidance) Scheme, 2003 (hereinafter referred to as the said Scheme). The clarification is sought as under –

 

i) Interpretive letter for the proposed scheme of inter se transfer of 0.41% shares of Pilani Investment and Industries Corporation Ltd. amongst promoters namely Central India Industries Ltd., Shekhavati Investments and Traders Ltd., Janardhan Trading Company Ltd. and Birla Eastern Ltd.

 

2.0 It is, inter-alia, informed by you vide your letter under reference that interse transfer of shares is proposed between “Promoters” of Pilani Investment and Industries Corporation Ltd (PIICL) under Regulation 3(1)(e)(iii)(b) of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 {Takeover Regulations} and have submitted the following;

 

                                i.      PIICL is a listed company quoted on Madhya PradeshStock Exchange, Indore and Delhi Stock Exchange, Delhi. PIICL has been regularly complying with Regulations 6, 7 and 8 of the Takeover Regulations within stipulated time.

 

ii. The Transferors namely Janardhan Trading Company Ltd (JTC) and Birla Eastern Ltd (BEL) are shareholders in PIICL for more than three years. As on date their holding in PIICL is as under:

 

Transferors

No. of Equity Shares

Percentage

Janardhan Trading Company Ltd

8,176

0.10%

Birla Eastern Ltd

25,015

0.32%

 

iii. The Transferors have all along been deemed to be Promoters/Persons acting in concert in control of PIICL as defined in Regulation 2(1)(c), 2(1)(e)(1) and 2(1)(h)(i) of Takeover Regulations. The said fact was duly disclosed in the declarations under Regulation 8 of the Takeover Regulations filed by the transferors to PIICL and by PIICL to stock exchanges. The Transferors have also been duly complying with Regulations 6 and 7 of the Takeover Regulations within stipulated time.

 

iv.     The Transferees namely Central India Industries Ltd and Shekhavati Investments and Traders Ltd are shareholders in PIICL for more than three years. As on date their holding in PIICL is as under :

 

Transferees

No. of Equity Shares

Percentage

Central India Industries Ltd

10,37,359

13.12%

Shekhavati Investments and Traders Ltd

43,141

0.55%

 

v.  The Transferees have all along been deemed to be Promoters/Persons acting in concert in control of PIICL as defined in Regulations 2(1)(c), 2(1)(e)(1) and 2(1)(h)(i) of Takeover Regulations. The said fact was duly disclosed in the declarations under Regulation 8 of the Takeover Regulations filed by the Transferee to PIICL and by PIICL to stock exchanges. The transferees have also been duly complying with Regulations 6 and 7 of the Takeover Regulations within stipulated time.

 

vi.  The said Transferees propose to acquire shares in PIICL from the said Transferors by interse transfer of shares amongst Promoters named in Paragraphs 3(i) and 3(iv) above under Regulation 3(1)(e) of the Takeover Regulations; at market price prevailing on the date of transfer as under :

 

Transferors

Transferee

No. of Equity Shares

Percentage

Janardhan Trading Company Ltd

Central India Industries Ltd

8,176

0.10%

Birla Eastern Ltd

Central India Industries Ltd

11,405

0.14%

Birla Eastern Ltd

Shekavati Investments & Traders Ltd.

13,000

0.17%

Total

32,581

0.41%

 

vii. You have also undertaken that the transfer price shall not exceed 25% of the price as determined in terms of sub-regulations (4) and (5) of Regulation 20 of the Takeover Regulations.

 

viii. The subject matter of shares in transfer are 32,581 shares (0.41%). The transfer being an interse transfer amongst promoters, there will be no change in the aggregate shareholding of the Promoters/Persons acting in concert before and after acquisition. The acquirers, transferees and the target company have complied fully with the provisions of chapter II of Takeover Regulations. The transferor & transferee are holding the shares for more than 3 years. The transfer of shares shall not be at a price more than 25% of the price determined as per regulation 20(4) & 20(5) of the Takeover Regulations.

 

3.0             In view of the facts set forth in your aforesaid letter, our views in relation to the issue raised in your letter under reference are as follows :

 

3.1  As per Reg. 3(1)(e)(iii) (b) of the Takeover Regulations, acquisition pursuant to transfer of shares amongst Promoters is eligible for exemption from the applicability of the Regulations 10, 11 and 12 of the Takeover Regulations subject to the acquirer complying with the following conditions -

 

  •  
    •  
      • The transferor(s) and transferee(s) are promoters in terms of provisions of Regulation 2(1)(h) of the Regulations.

 

  •  
    •  
      • The transferees collectively as well as transferors collectively have been holding shares in the Target Company for a period of atleast three years prior to the date of acquisition.

 

  •  
    •  
      • The provisions of Chapter II of the Takeover Regulations have been complied within the specified time-limit by both the transferees and transferors.

 

  •  
    •  
      • The inter se transfer price should not exceed 25% of the price determined in terms of Regulations 20(4) and 20(5) of the Takeover Regulations.

 

  •  
    •  
      • As required under Regulation 3(3) of the Takeover Regulations, the transferee (Acquirer) should inform the stock exchanges at least 4 working days in advance of the date of proposed acquisition in case of acquisition exceeding 5% of the voting share capital of the target company.

 

  •  
    •  
      • The transferee (Acquirer) shall file a report with SEBI in the specified format within 21 days of the date of acquisition along with requisite fees prescribed, in terms of Regulations 3(4) and 3(5) of the Regulations.

 

4.0 It is observed that in the case referred by you the transferees and the transferors are promoters of the Target Company in terms of Regulation 2(1) (h) of the Takeover Regulations and they have been holding shares in the Target Company for the last three years. Further, both transferees (Acquirers) and transferor have complied with the provisions of regulations 6 and 8 within the stipulated time in the Takeover Regulations.

 

5.0  In view of the above, the proposed transaction would be exempted under regulation 3(1)(e)(iii)(b) of the Takeover Regulations if the transaction is consummated as proposed in your letter and the conditions as stated above are complied with.

 

6.0 This position is based on the representation made to the Department 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.

 

7.0 Please note that this position is only with respect to applicability of 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