GENERAL MANAGER
DIVISION OF CORPORATE RESTRUCTURING
CFD/DCR/TO/AG/04
May 3, 2004
Shri Indubhai S Kapashi
503, Pleasant Palace,
16, N D road,
Mumbai 400 006
Dear Sir,
Sub.: Request for Interpretive Letter/No action letter under the SEBI (Informal Guidance) Scheme, 2003- Acquisition of shares of Kapashi Commercials Ltd. (KCL) - SEBI (Substantial Acquisition of Shares And Takeovers) Regulations, 1997 {Regulations}
Ref : Your letters dated March 22, 2004 on the captioned subject
1. Please refer to your letters cited above, seeking Interpretive Letter under SEBI (Informal Guidance) Scheme, 2003. The Interpretive Letter is sought on the following two issues:
a. Whether you (the acquirers) can accept all the equity shares tendered in the open offer?
b. If yes, you are agreeable to continue to give an exit opportunity to the remaining shareholders on a continuous basis.
2. It is, inter-alia, informed by you that:-
a. Shri Sevantilal S. Kapashi, Shri Paresh S. Kapashi, Shri Indubhai S Kapashi and Shri Nimish I Kapashi are the promoters of Kapashi Commercial Ltd. (KCL). The equity shares of KCL are listed on BSE.
b. Alongwith the other persons in the promoter group, they are holding 60.68% of the equity capital of KCL. They made a voluntary cash offer to the equity shareholders of KCL to acquire upto 2,93,100 (29.31%) equity shares of the voting capital of KCL at a price of Rs.22/- per share. The open offer opened on 16/02/04 and closed on 16/03/04.
c. Keynote Corporate Services Ltd. (KCSL), Manager to the offer has informed you that they have received 216 applications aggregating to 3,63,954 (36.93%) equity shares of KCL. The total number of shareholders of the company before the offer was 316.
d. Out of the total 316 shareholders 216 shareholders have tendered their application in the open offer. Considering the response, only 100 shareholders aggregating to 29200 equity shares i.e. 2.92% of the total capital have not responded to the offer.
e. The equity shares of KCL are not traded on the stock exchange since past several years. Equity shares of KCL are available in physical form only. The company has not been paying any dividend for past 3 years.
f. Looking at the response to the open offer, promoters wish to accept all the shares tendered in the offer. If all the shares in the open offer are accepted, the holding of promoters will become 97.08% of the total equity share capital of the company.
g. Promoters are willing to delist the equity shares of the company from BSE and wish to continue to give an exit option to the remaining shareholders at the same price of Rs.22/- per share.
h. The promoters are agreeable to follow all the other procedure for voluntary delisting as mentioned under Clause 6 of SEBI (Delisting of Securities) Guidelines, 2003.
3. Without necessarily agreeing with your analysis, it is observed from your submissions that the aforesaid open offer was made to shareholders of KCL to acquire upto 2,93,100 (29.31%) equity shares of the voting capital of KCL at a price of Rs.22/- per share.
4. Reference is drawn to para 5 on page no. 4 of your letter of offer dated 23.01.04 wherein it was disclosed inter alia that
“As a consequence of the offer the public shareholding in KCL will not reduced to 10% or less of the voting capital of the company. Hence, provision of Regulation 21(3) of the Regulations are not applicable.”
“Acquirers have undertaken that they would not be acquiring any shares of KCL from the open market or otherwise during the offer period over and above the offer of 29.31%.”
In this context, it may be noted that ‘offer period’ is defined in regulation 2(1)(f) of the captioned Regulations, as “the period between the date of entering into Memorandum of Understanding or the public announcement, as the case may be and the date of completion of offer formalities relating to the offer made under these Regulations.”
5. Further reference is drawn to para ‘11g’ on page 11 of the aforesaid letter of offer, wherein it was disclosed that
“Where the number of shares offered for sale by the shareholders is more than the shares agreed to be acquired by the acquirers, acquirers will accept the offers received from the shareholders on a proportionate basis, in consultation with the Manager to the offer taking care to ensure that …….”
The said disclosure was made in terms of regulation 21(6) of the captioned Regulations, which provides for proportional acceptance in a case where the shares offered by shareholders are more than the shares agreed to be acquired by acquirer.
6. Regulation 26 of the captioned regulations permits upward revision of an offer made under the regulations inter alia in respect of number of shares to be acquired, only upto 7 working days prior to the date of closure of the offer, subject to the conditions mentioned therein. The offer period is already over in the instant case. Thus, any upward revision is not possible in respect of the offer made by you.
7. In the light of the above, it is not permissible for you (the acquirers) to acquire any share in the offer period over and above 29.31% of equity shares as disclosed by you in the letter of offer. Any further acquisition of shares beyond 29.31% in the offer period by the acquirers will be in contravention of the disclosures made in the letter of offer and will be in violation of the captioned Regulations. Any offer in excess of the offer size by the shareholders would have to be dealt with in accordance with regulation 21(6) and the disclosures made in the letter of offer.
8. However, if you (the acquirers) wish to purchase shares beyond the number disclosed in the letter of offer, you may do so after completion of the offer period and complying with the applicable provisions of the captioned regulations and the SEBI (Delisting of Securities) Guidelines, 2003.
9. Accordingly, question no.i) raised by you is answered in the negative. As a result, question no.ii) does not survive for consideration.
10. 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 by you.
Yours faithfully,
S V MURALIDHAR RAO