IN THE MATTER OF PROPOSED ACQUISITION OF SHARES OF LARSEN & TOUBRO LIMITED [EXEMPTION APPLICATION FILED UNDER REGULATION 4 (2) OF THE SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997]
MO/67/CFD/08/04
1.0 BACKGROUND
1.1 Larsen & Toubro Ltd. (hereinafter referred to as ‘the target company’) is a public limited company incorporated under the Companies Act, 1956 and having its registered office at L&T House, Ballard Estate, Mumbai–400001.
1.2 The equity shares of the target company are presently listed at The Stock Exchange, Mumbai and National Stock Exchange of India Ltd.
1.3 L & T Employees Welfare Foundation, an independent private trust (hereinafter referred to as ‘the acquirer’) formed for the welfare of the employees of the target company, proposes to acquire 0.77% of the equity share capital of the target company from Samruddhi Swastik Trading and Investments Ltd., a wholly owned subsidiary of the target company. The acquirer, at present holds 14.95% of the total paid up share capital of the target company, which it had acquired from the said Sumrudhi Swastik Trading & Investments Ltd., as per the scheme of arrangement sanctioned by the High Court, Mumbai. After the proposed acquisition the shareholding of the acquirer will increase to 15.72%.
2.0 APPLICATION FOR EXEMPTION
2.1 The acquirer, vide letter dated July 12, 2004, filed an application with the Securities and Exchange Board of India (hereinafter referred to as ‘SEBI’) under sub-regulation (2) of regulation 4 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as ‘the said Regulations’) seeking exemption from making a public offer under regulation 10 of the said regulations, in respect of the proposed acquisition of 9,62,996 equity shares of the target company. The acquirer had earlier filed an application dated September 09, 2003 with SEBI seeking exemption from making a public offer under regulation 10 of the said regulation in respect of the then proposed acquisition of 3,91,22,129 equity shares of the target company, in response to which, SEBI, vide its letter dated October 21, 2003, had interalia informed the acquirer to make an application, if desired, after the demerger of the cement business of the target company. Accordingly, after the approval of the scheme of arrangement by the High Court, Mumbai, on 22.04.04, the acquirer has filed the present application dated July 12, 2004.
2.2 As per the said application dated July 12, 2004 , the shareholding pattern of the target company as on July 09, 2004 is as follows:
|
Shareholders category
|
Number of registered shareholders/ folios
|
Before the proposed acquisition
|
After the proposed acquisition
|
|
|
|
Number of shares/total voting rights held
|
% of shares / total voting capital held
|
Number of shares/voting rights
|
% of shares / voting rights
|
|
Promoter Group
|
-
|
-
|
-
|
-
|
-
|
|
Fis/Ins Cos/Banks
|
222
|
46410353
|
37.31%
|
46410353
|
37.31%
|
|
FIIs/NRIs/OCBs/ GDRs
|
4110
|
26953012
|
21.67%
|
26953012
|
21.67%
|
|
Grasim & Associates
|
1
|
962996
|
0.77%
|
-
|
-
|
|
Acquirers
|
1
|
18598068
|
14.95%
|
19561064
|
15.72%
|
|
Public
|
343033
|
31477367
|
25.30%
|
31477367
|
25.30%
|
|
Total
|
347367
|
124401796
|
100.00%
|
124401796
|
100.00%
|
3.0 SUBMISSIONS IN THE EXEMPTION APPLICATION
3.1 In the aforesaid application, interalia the following grounds are mentioned for seeking the exemption:
(a) the acquirer was established for promoting welfare activities for the benefit of employees of the target company and does not have commercial objectives and activities.
(b) the acquirer does not intend to:
i) trade in the shares of the target company in the open market or
otherwise, for commercial purpose.
ii) to acquire the management control of the target company.
iii) to nominate/sponsor any person for the directorship of the target
company.
(c) the target company has recently demerged its cement business in order to remain focussed in its various engineering business. This gives an opportunity to organise the corporate structure of the remaining business of the target company in such a manner that its strategic role is well protected while preserving the special character of ownership and the professional management model.
(d) the acquirer , together with the FIs, will always act in the interest of all the stakeholders of the target company and enable the target company to continue to contribute to the nationally critical and strategic sectors for the Government such as in Nuclear, Aerospace, Defence and infrastructure fields.
4.0 CONSIDERATION OF THE APPLICATION
4.1 The aforesaid application dated July 12, 2004 was forwarded by SEBI to the Takeover Panel in terms of sub-regulation (4) of regulation 4 of the said Regulations, vide its letter dated July 13, 2004. The Takeover Panel, vide its report dated July 22, 2004, recommended grant of exemption as sought by the acquirer, with the observation that “Perusing the facts stated in the application and considering the object of acquisition of the shares by a private Trust of the employees of the target company, the grant of exemption as sought is recommended.”
4.2 I have perused the documents on record and noted that the acquirer is established for promoting the welfare activities for the benefit of the employees of the target company. I have also noted that the acquirer does not intend to trade in the shares of the target company in the open market or for any commercial purpose and further there is no intention on the part of the acquirer to acquire the control on the management of the target company. I have further noted that the acquirer does not intend to nominate / sponsor any person for the directorship of the target company. Overall, I observed that the present acquisition by the acquirer is mainly for protecting the welfare of the employees of the target company and at the same time to preserve the professional management model of the target company.
4.3 In view of the above facts and circumstances, I conclude that it is a fit case for granting exemption from making an open offer as stipulated in regulation 10 of the said Regulations.
5.0 ORDER
5.1 Having regard to the above, and the recommendations made by the Takeover Panel and also in the interest of the welfare of the employees of the target company, I, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act 1992 read with sub regulation (6) of regulation 4 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, hereby grant exemption to the acquirer, namely L & T Employees Welfare Foundation from making an open offer in terms of regulation 10 of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997. The proposed acquisition should be completed within 30 days from the date of this order.
5.2 This order shall come into force with immediate effect.