May 06, 2004
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Informal Guidance
Deputy General Manager
Corporation Finance Department
Division of Issues & Listing
CFD/DIL/IG/ / /04
May 6, 2004
JM Morgan Stanley Pvt. Ltd.
141, Maker Chambers III
Nariman Point
Mumbai – 400 021
Dear Sir,
Sub: Request for No Action/ interpretative Letter in in relation to the proposed public issue of TCS ltd. under Securities and Exchange Board of India (Informal Guidance) Scheme, 2003 for guidance
1.0 Please refer your letter dated April 17, 2004 seeking “Interpretive/No-Action Letter” under the captioned scheme. It is inter alia, submitted by you, vide the letter under reference, that –
a. TCS Ltd proposes to make a public issue to the extent of 10% of proposed post issue capital. Of which, 5% would be a fresh issue and the rest 5% constituting an offer for sale by the promoter group. The company intends to provide an opportunity to all its existing shareholders to participate in the offer for sale. As some of the shareholders in the promoter group are public charitable trusts and listed companies, they have to obtain the approval of their board of directors of their respective boards. The company has also expressed concerns on the part of the shareholders who are already listed companies who are worried about the prices of their own shares after undertaking such a move.
b. As the draft offer document is intended to be filed with SEBI by the month end, the company might not have received the authorizations from some of the existing shareholders on account of reasons described in the above paragraphs.
c. Hence, the Company proposes that at the time of filing the draft Offer Document with SEBI, it would indicate the total number of shares to be sold under fresh issue and offer for sale. However, the exact number of shares to be sold by each shareholder under offer for sale would be disclosed prior to filing the Red Herring with the Registrar of Companies.
d. Further Tata Sons Limited, the largest shareholder and the promoter, would give an undertaking that in case the total number of the shares offered by other exiting shareholders is less than 5% of the post issue capital, then it would sell such number of equity shares so that the offer for sale component aggregates to 5% of the post issue capital. Hence, there would be no change in the capital structure of the company.
e. The “No-Action Letter” has been sought on the issue that TCS be permitted to proceed with the filing of the draft offer document with SEBI under the circumstances described above. It is also requested to treat the contents of this letter as confidential till such time as the Draft Red Herring Prospectus is filed with Securities and Exchange Board of India to avoid breach of any international or local advertising restrictions.
2.0 Clauses 6.17.4, 6.23.1 and 6.43.1 of SEBI (DIP) guidelines require that the issue proposed to be made by the company should be duly authorized and the same is reflected in the draft RHP ( A public document) filed with SEBI. Further clauses 6.4 of SEBI (DIP) Guidelines, 2000, also deals with the disclosures to be made in the Draft offer document relating to the capital structure, shareholding pattern of the company.
It is observed from your submissions that if TCS Limited is permitted to proceed with the filing of the draft RHP with SEBI without having final names of offerors but with an undertaking from Tata Sons Limited to meet the shortfall and to ensure that offer for sale aggregates to 5% of the post issue capital, the capital structure disclosed in the draft RHP of TCS limited would not undergo any change.
In view of the submissions made by the applicant, it has been decided to issue a No action Letter for the purpose of filing draft RHP for proposed IPO of TCS, with SEBI pending consent / finalization of names of the offerors, subject to complying with the following requirements :
- TCS Limited will not proceed for filing of RHP with ROC unless all the consents of shareholders offering shares for sale are in place and all the offerors have certified that the shares being offered by them are fully paid up, free from any encumbrances, lock-in etc.
- The draft RHP filed with SEBI shall contain an undertaking from Tata Sons Limited that in case the total number of the shares offered by other offering shareholders is less than 5% of the post issue capital, then it would sell such number of equity shares so that the offer for sale component aggregates to 5% of the post issue capital.
- The draft RHP filed with SEBI shall also contain a confirmation from Tata sons Limited that the shares proposed to be offered by it are fully paid up, free from any encumbrances, lock-in etc.
- The draft RHP filed with SEBI shall contain full disclosures about the proposed arrangement and also the reason as to why TCS limited has not been able to get the consents from the shareholders or requisite approvals at the time of filing of draft RHP.
- All other relevant provisions of DIP guidelines/ Companies Act and other applicable and relevant Acts are duly complied with.
4.0 As requested by you, this letter will not be made available to public till such time as the Draft Red Herring Prospectus is filed with Securities and Exchange Board of India or expiry of 90 days from the date of this letter, whichever is earlier.
5.0 You may note that the above views are expressed only with respect to the clarification sought on applicability of SEBI (DIP) Guidelines 2000 and do not affect the applicability of any other law. You may also note that the views expressed here pertain to those of the Corporation Finance Department - Division of Issues and Listing and the board is not bound by the contents of this letter.
Yours faithfully,
Neelam Bhardwaj