GENERAL MANAGER
DIVISION OF CORPORATE RESTRUCTURING
Tel - 22823886
Fax - 22829520
Email - mdrao@sebi.gov.in
CFD/DCR/TO/MM/ /2004
September 15, 2004
DALP Tradepool Pvt. Ltd.
60, Marshalls Road, Egmore,
Chennai – 600008
Dear Sirs,
Sub: Request for an interpretive letter under the SEBI (Informal Guidance) Scheme, 2003.
Ref: Letters dated June 14, 2004, July 7, 2004, July 13, 2004 and August 4, 2004
1. Please refer to your letters cited above, seeking interpretive letter under SEBI (Informal Guidance) Scheme, 2003. The interpretive letter is sought on the issue as to whether the proposed acquisition of 25.34% in the Highland Produce Company Limited (HPL) and 19.75% shares in the Rajagiri Rubber and Produce Company Limited (RRL) by DALP Tradepool Pvt. Ltd. (DALP) from Kalpetta Estates Limited (KEL) would be exempt from the applicability of the SEBI (Substantial Acquisition of Shares And Takeovers) Regulations, 1997 {“the Regulations”} in terms of Regulation 3(1)(e)(i) of the Regulations .
2. It is, inter-alia, informed by you that:-
- KEL is a listed company holding 1,36,812 (25.34%) shares in HPL (Target Company ‘A’) and 53,326 (19.75%) shares in RRL (Target Company ‘B’).
- DALP is an unlisted company which currently does not hold any shares in HPL & RRL.
- DALP wishes to acquire all the shares held by KEL in both HPL & RRL.
- DALP & KEL are group companies and fall within the meaning of ‘group’ under section 2(ef) (i) of the MRTP Act, 1969.
- KEL has complied with the provisions of Chapter II with respect to both the target companies. Since DALP is not holding any shares of the target companies, therefore, compliance with the provisions of Chapter II is not applicable for DALP.
- The transfer of shares from KEL to DALP will not amount to a change in control over the target companies.
3. Without necessarily agreeing with your analysis, it is observed that –
i) both transferor (KEL) and transferee (DALP) companies are controlled by the same group of persons who are also in control over both the target companies. Thus, the KEL and DALP come within the definition of group under section 2(ef) (i) of MRTP Act, 1969.
ii) the Annual Reports of both the target companies for the year 2002-2003 shows KEL and DALP as associated companies and companies under common control. It is confirmed that these are the last published Annual Reports of the target companies.
iii) that the transferor company has complied with the provisions of Regulations 6, 7 and 8 and these regulations do not apply in case of DALP as it does not hold any shares in any of the target companies.
4. In this regard, we are of the view that in terms of Regulation 3(1)(e)(i) read with Explanation 2 to Regulation 3(1)(e), nothing contained in regulation 10,11 and 12 of the Regulations applies to inter se transfer of shares amongst group coming within the definition of group as defined in the MRTP Act, 1969 subject to the following :
1) The persons constituting such group have been shown as group in the last published Annual Report of the target company.
2) The transferor and transferee have complied with regulation 6, 7 and 8.
5. From the above, it appears that the requirements of Regulation 3(1)(e)(i) are complied with in respect of the proposed acquisition and the said acquisition would be exempted from the applicability of regulations 10,11 and 12. However, you may note that the acquirer (DALP) will be required to comply with other provisions relating to reporting and disclosures under regulations 3(3), 3(4) read with 3(5) and regulations 7 and 8 of the Regulations.
6. 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. You may therefore, take opinion from any expert, if you desire.
7. 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,
S V MURALI DHAR RAO