Nov 19, 2004
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Informal Guidance
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D. Chanda
Chief General Manager
IIMD & CFD
Tel. : 00 9122 22882946
Fax : 00 9122 22829520
E-MAIL : chanda@sebi.gov.in
WEB SITE : http/www.sebi.gov.in
CFD/DCR/IG/26038/04
November 19, 2004
ICICI Securities Ltd,
ICICI Centre,
H.T. Parekh Marg,
Churchgate
Mumbai – 400 020
Dear Sir,
Sub.: Request for an interpretive letter under the SEBI (Informal Guidance) Scheme, 2003 and Securities And Exchange Board of India (Delisting of Securities) Guidelines – 2003 – regarding Siemens Limited.
1. This has reference to your letter dated September 13, 2004 on the above mentioned subject seeking “interpretive letter” under the SEBI (Informal Guidance) Scheme – 2003.
2. You had represented that a merger proposal between M/s Siemens Ltd and M/s Siemens VDO Automotive Limited is being contemplated. Siemens Ltd was listed in India in 1971 with CCI approval for a 51% promoter’s holding post the initial public offering. Subsequently, on 16.4.2003 Siemens has received approval from Foreign Investment Promotion Board (“FIPB”) to increase the promoter’s shareholding to 60% for the purpose of a proposed buy-back of shares. Currently, the foreign promoter Siemens AG holds 54.63% of the equity capital with the balance equity capital with Indian public, institutional investors and other private bodies. As a result of the proposed merger the promoter holding in M/s Siemens Ltd. is expected to go up marginally.
3. You had referred to clause 4.1(b) of the SEBI (Delisting of Securities) Guidelines, 2003 which inter alia makes the guidelines applicable to any acquisition of shares of the company consequent to which the public shareholding falls below the minimum limit prescribed in the listing conditions or the Listing Agreement. In the context of this clause you had sought a clarification on the issue of whether the proposed merger between Siemens Ltd and Siemens VDO Automotive Ltd. would result in applicability of Clause 4.1(b) of Delisting Guideline 2003 for a compulsory delisting of Siemens. You have further sought clarification on whether 25% level (public shareholding) can be construed as being the level that needs to be breached for the purpose of delisting in view of the levels at which the listings are being done currently by the Stock Exchanges.
Our views on the issue are as under:
1. The policy regarding minimum level of public shareholding to be maintained in a listed company on a continuous basis is under review and as such this opinion is confined to the applicability of clause 4.1(b) of the Delisting Guidelines in light of the proposed merger referred to by you in your aforesaid letter.
2. Clause 4.1(b) of the Guidelines makes them applicable to “any acquisition of the shares of the company or scheme or arrangement, by whatever name referred to, consequent to which the public shareholding falls below the minimum limit specified in the Listing Agreement that may result in delisting of securities.”
2.It seems probable in your case that consequent on the merger the public shareholding in the company may fall below such minimum limit.
3. We opine that the above clause makes the Delisting Guidelines applicable inter alia to only to such schemes of amalgamation which may result in the public shareholding falling below the required minimum limits, as are intended to result in delisting. In view of your representation that the promoters do not intend to delist the shares of the company after the merger, we take the position that clause 4.1(b) of the Delisting Guidelines does not cover your case, if the public shareholding in the company is brought up to the required minimum limits within a reasonable period of time of 6 months from the effective date of the scheme. If the public shareholding is not brought up to the minimum limits within the said period of 6 months, it may be inferred that the scheme was intended to result in delisting and that therefore clause 4.1(b) of the Delisting Guidelines would apply. Accordingly, in such event, the promoters would have to give an exit opportunity to the shareholders by the book building method as contemplated in the Delisting Guidelines.
4. This interpretation is based on the representation made to the Division in your letter quoted above. Different facts or conditions might require a different result. This letter does not express decision of the Board on the questions referred in your letter.
Yours faithfully,
DULAL CHANDA