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Century Enka Limited

May 11, 2005
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Informal Guidance

D.Chanda

Chief General Manager

IMD & CFD

Tel. : 00 9122 22882946

Fax : 00 91 22 22829520

E-MAIL : chanda@sebi.gov.in

WEB SITE: http//www.sebi.gov.in

CFD/DCR/IG/AT/40352 /2005

May 11, 2005

 

TGS Investmenet & Trade Pvt Ltd

71-A, Mittal Chamber,

7th Floor,

Nariman Point

Mumbai – 400 021

Dear Sirs,

Sub. : Request for a ‘No Action Letter’ under SEBI (Informal Guidance) Scheme, 2003.

Please refer to your letter dated March 7, 2005 and other correspondences exchanged on the captioned subject seeking ‘No Action Letter’ under SEBI (Informal Guidance) Scheme, 2003. The ‘No Action Letter’ has been sought on the issue as to whether the sale of shares of Century Enka / Tanfac / HGI by Grasim / Hindalco / IRIL and the acquisition of similar number of shares of Century Enka, Tanfac and HGI by Mrs. Rajashree Birla / TGS / A K Agarwala under the proposed restructuring of the holdings would tantamount to an inter se transfer of shares among the promoters under Regulation 3(1)(e) of SEBI ( Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

 

  1. It is, inter-alia, informed by you that:-

 

(i)                  TGS Investment & Trade Private Limited (TGS) and is an Aditya Birla Group (Group) Company.

 

(ii)                The Group proposes to restructure within itself the holdings that Grasim Industries Limited (Grasim), Hindalco Industries Limited (Hindalco) and Indian Rayon And Industries Limited (IRIL) have in a) Century Enka Limited (Century Enka), b) Tanfac Industries Limited (Tanfac) and c) HGI Industries Limited (HGI).

 

(iii)               Mrs. Rajashree Birla and TGS are promoters of Century Enka and presently hold 1,35,800 shares in Century Enka representing 0.47 % of the shares. They propose to acquire 21,17,170 shares (Grasim holding) in Century Enka representing 7.39 % shares. Grasim is also promoters of Century Enka.

 

(iv)              Mr. A K Agarwala and TGS (Transferee) are promoters of Tanfac and presently hold 150 shares in Tanfac representing 0.00% of the shares. Transferees collectively propose to acquire 19,91,652 shares in Tanfac representing 19.97 % shares from Hindalco Industries Ltd and Grasim Industries Ltd. Their post acquisition holding would be 19,91,802 shares representing 19.97 % of the shares. Hindalco Industries Ltd and Grasim Industries Ltd. are promoters of Tanfac.

 

(v)     Mrs. Rajashree Birla and TGS(Transferee) are promoters of HGI and presently hold 53,604 shares in HGI representing 1.42 % of the shares. The Transferees collectively propose to acquire 4,32,322 shares in HGI representing 11.41 % shares from Indian Rayon and Industries Ltd. Their post acquisition holding would be 4,85,926 shares representing 12.83 % of the shares.

 

(vi)              The transferees, transferors and the target companies have complied fully with the provisions of Chapter II of SEBI (SAST) Regulations, 1997.

 

(vii)             The transferors and transferees with respect to acquisitions in Century Enka, tanfac and HGI as detailed above are collectively holding shares in the target Company for more than 3 years.

 

(viii)           The transfer of shares shall not be at a price more than 25 % of the price determined as per Regulation 20 (4) and 20 (5) of the SEBI (SAST) Regulations, 1997.

 

  1. In view of the facts set forth in your aforesaid letter and in terms of paragraph 7 of the Guidance Scheme, our views in relation to the issue raised in your letter under reference are as follows :

 

(i)                  As per Regulation 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 -

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

b.      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.

c.      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.

d.      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.

e.      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.

 

(ii) From your letter, it is observed that under the proposed transaction there would be acquisition of 21,17,170 shares in Century Enka representing 7.86 % shares by Mrs. Rajashree Birla and TGS (acquirers/transferees) from Grasim Industries Ltd (transferors); acquisition of 19,91,652 shares in Tanfac representing 19.97 % shares by Mr. A K Agarwala and TGS (acquirers/transferees) from Hindalco Industries Ltd and Grasim Industries Ltd. (transferors) and acquisition of 4,32,322 shares in HGI representing 11.41% shares by Mrs. Rajashree Birla and TGS (acquirers/transferees) from Indian Rayon and Industries Ltd (transferors)

 

(iii)    It is also observed that 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 collectively holding shares in the Target Company for the last three years. Further, transferees (Acquirers) and transferors have complied with the provisions of regulations 6 and 8 within the stipulated time in the Takeover Regulations.

 

  1. In view of the above, the Division would not recommend any action in respect of the proposed transaction under the Takeover Regulations if the transaction is consummated as proposed in your letter and the conditions as stated above are complied with.
     
  2. This position is based on the representation made to the Division in your aforesaid letter. Different facts or conditions might require a different result.
     
  3. This letter does not express decision of the Board on the questions referred. 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 requirement.

 

Yours faithfully, 

 

D. Chanda