LETTER OF GUJARAT GAS COMPANY LTD.
GGCL/SEC/2006/ 22 May 2006
To,
Mr. V. S. Sundaresan,
General Manager,
Securities & Exchange Board of India,
29th Floor,
World Trade Centre,
Cuffe Parade, Colaba,
Mumbai - 400 005
Dear Sir,
Request for interpretive letter – listing of non-convertible preference shares on private placement basis
We enclose a case for your opinion regarding requirement for listing of non-convertible preference shares allotted on a preferential basis.
We request you to issue interpretive letter under the SEBI (Informal Guidance) Scheme, 2003.
We enclose cheque (no. 511523 dated 22 May 2006) for Rs. 25,000/- drawn on HDFC Bank payable at par towards fees specified under the Scheme.
Thanking you,
Yours faithfully,
For Gujarat Gas Company Limited
Rajiv Shah
Company Secretary
Case for opinion
Background:
Gujarat Gas Company Limited (GGCL) is a public company and has listed its equity shares on Bombay Stock Exchange Limited, National Stock Exchange of India Limited, Ahmedabad Stock Exchange Limited and Vadodara Stock Exchange Limited. GGCL is engaged in the business of transmission and distribution of Natural Gas, in the state of Gujarat.
GGCL is proposing to enter into the business of cogeneration of power (“Cogen”), whereby it will be providing energy services to its customers.
For commencing the business of Cogen, the Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations provide for the foreign shareholder to hold a minimum paid up share capital of US Dollars 5 million.
BG Asia Pacific Holdings Pte. Limited (BGAPH), Singapore, a foreign shareholder and which is also the holding company of GGCL, holds equity share capital to the tune of Rs. 8,35,18,750. A Committee of the Board of Directors has, in its meeting held on 18 May 2006, allotted 14,400,000, 7.5% Redeemable Cumulative Non-convertible Preference Shares (RCNPS) of Rs. 10 each aggregating to Rs. 144,000,000 to BGAPH on private placement basis, so that the total paid up share capital held by BGAPH is not less than USD 5 million.
Clause 24 (a) of the Listing Agreement provides for obtaining ‘In-principle approval’ for listing before issuing further shares of securities. The relevant clause is reproduced below:
“The company agrees to obtain ‘in-principle’ approval for listing from the exchanges having nationwide trading terminals where it is listed, before issuing further shares or securities. Where the company is not listed on any exchange having nationwide trading terminals, it agrees to obtain such ‘in-principle’ approval from all the exchanges in which it is listed before issuing further shares or securities. The company also agrees to make an application to the Exchange for the listing of any new issue of shares or securities and of the provisional documents relating thereto.”
GGCL applied for ‘In-principle approval’ for listing of RCNPS on the BSE. The ‘In-principle approval’ was granted by BSE by its letter dated 7 April 2006. Photocopy of the approval is enclosed for your reference. It may be noted that GGCL is issuing RCNPS for the first time.
It is felt that the RCNPS allotted by GGCL to BGAPH would not be required to be mandatorily listed on the stock exchanges unless GGCL desires to get the same listed under the circumstances wherein no such shares of the same class and with similar rights have been earlier issued and listed by the company.
Query:
1. Would the RCNPS allotted by GGCL to BGAPH on private placement basis amount to further issue of shares in terms of provision of clause 24 (a) of the Listing Agreement?
2. Does GGCL need to mandatorily get listed the RCNPS proposed to be issued to BGAPH on private placement basis.
3. Any other suggestion that you may have in this regard.
For Gujarat Gas Company Limited
Rajiv Shah
Company Secretary
Encl: ‘In-principle approval’ dated 7 April 2006 received from BSE
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REPLY GIVEN BY MRD-DoP
General Manager
Market Regulation Department – Policy
Email:-sundaresanvs@sebi.gov.in
MRD/Policy/IGS/Corp Debt/AT/ /2006
June 12, 2006
Shri Rajiv Shah
Company Secretary
Gujarat Gas Company Ltd.
Near Primal Garden
Ellisbridge
Ahmedabad – 380 006
Dear Sir,
Sub: Informal Guidance – Interpretive Letter – Clarification on listing of non convertible redeemable preference shares
Ref: Request for Guidance from Gujarat Gas Company Ltd. (GGCL) vide letter dated May 24, 2006
1. Please refer to your letter referred to above seeking clarification on the listing of non-convertible redeemable preference shares.
2. You had represented as under:-
a. GGCL is a listed company with its equity shares listed in BSE, NSE, ASE and VSE which is proposing to enter the business of cogeneration of power whereby it will be providing energy services to its customers. For commencing the aforesaid business, the FEMA Regulations require that the foreign shareholder of the company holds a minimum paid up share capital of USD $ 5 mn.
b. For the aforesaid purpose, BG Asia Pacific Holdings Pte. Ltd. (BGAPH), the holding company of GGCL, has allotted 14,400,000, 7.5% redeemable, cumulative, non-convertible preference shares on private placement basis in the past, so that the total paid up capital held by BGAPH is not less than USD $ 5 mn. It is also learnt that this aforesaid private placement issuance is the first ever preferential issuance made by the company.
3. Based on the above facts, you have sought a clarification from SEBI in the form of an interpretive letter as to whether it would be necessary for GGCL to either obtain in-principal approval or list the above mentioned privately placed preference shares in the stock exchanges. This clarification is sought by you in the context of clause 24(a) of the Listing Agreement.
4. In reference to your aforesaid query, you are advised to be guided by the clarification offered by SEBI to M/s. Magma Leasing Ltd. (MLL) vide letter No. MRD/Policy/IGS/AT/65512/2006 dated April 25, 2006, a copy of which is available in the SEBI website – www.sebi.gov.in. A copy of the said reply to MLL is also enclosed with this letter for your records.
5. The above views are based on the representation made to the Department in your aforesaid 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. You may note that the above views are expressed only with respect to the clarification sought on the circulars referred by you in your aforesaid letter and do not affect the applicability of any other law or Regulations of SEBI.
Yours faithfully,
V S SUNDARESAN
Encl: As above.