IN THE MATTER OF PROPOSED ACQUISITION OF SHARES OF N. R. AGARWAL INDUSTRIES LIMITED [EXEMPTION APPLICATION FILED UNDER REGULATION 4(2) OF THE SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997]
1.0 BACKGROUND
1.1 N. R. Agarwal Industries 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 415-418, Janki Centre, 4th floor, 29, Shah Industrial Estate, Off. Veera Desai Road, Andheri (West), Mumbai – 400 058.
1.2 The equity shares of the target company are listed at The Stock Exchange, Mumbai, Ahmedabad Stock Exchange and Delhi Stock Exchange Association Ltd.
1.3 The target company is a leading manufacturer of Duplex Boards and Newsprint Papers. During the year 2002-2003, the profit of the target company to the total income to the said year was not even 1%. The target company, in its effort to reduce cost and remain competitive, has decided to install a power plant at the factory premises situated at Vapi, Gujarat State, which would bring about substantial savings in cost and allow it to produce higher quantities and increase its turnover. The said Power project has been appraised by Bank of India, who have sanctioned a term loan of Rs. 700 lakhs for the said project, with the margin money to be brought in by the promoters. Therefore, the promoters of the target company have decided to bring in the margin money by way of issue of 41,00,000 lac equity shares on preferential basis, at Rs. 10 per share.
1.4 As on date, the promoters of the target company hold 28.44% of the company’s capital. Of this, 19.21% is held by 8 entities, namely, Shri Nagindas R Agarwal, Smt. Suman N Agarwal, Shri Rajendra N Agarwal, Smt Reena R Agarwal, N. R. Paper & Boards Ltd., Suman Papers & Boards Ltd., Shri Saifee A. Jani and Smt Farzana Jani. These 8 entities, along with M/s Westend Paper and Board Pvt. Ltd. (collectively referred to as “acquirers”), propose to acquire the aforesaid 41,00,000 shares in the target company, by way of a preferential issue. After the proposed acquisition, the holding of the promoters would be 57.06% of the post issue paid up capital of the target company, as against the present 28.44%.
2.0 APPLICATION FOR EXEMPTION
2.1 The acquirers made an application dated June 02, 2004 to 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 in respect of the proposed acquisition of 41,00,000 equity shares by way of preferential allotment of the equity shares of the target company from the applicability of regulation 11 (1) of the said Regulations. The shareholding of the promoter in the target company (together with those of the persons acting in concert) would increase from 28.44% to 57.06% after the proposed acquisition.
2.2 As per the aforesaid application, the shareholding pattern of the target company before and after the proposed acquisition, is as follows:
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Shareholders category
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Number of registered shareholders as on date of application
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Before the proposed acquisition
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After the proposed acquisition
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|
|
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Number of shares/total voting rights held
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% of shares / total voting capital held
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Number of shares/voting rights
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% of shares / voting rights
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Promoter group
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Acquirers:
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a. Promoters
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4
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288195
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4.69
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758195
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7.40
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b.Persons Acting in Concert with the promoters
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4
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892900
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14.52
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4022900
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39.25
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c. Persons acting in concert with promoters who do not hold shares on the date of application
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1
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Nil
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N.A.
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500000
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4.88
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d. Promoter other than Acquirers
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12
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567700
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9.23
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567700
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5.53
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Promoter Group & Persons Acting in concert
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21
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17,48,795
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28.44
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58,48,795
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57.06
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FIs/Banks
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3
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219702
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3.57
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219702
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2.14
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FIIs/NRIs/OCBs
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3
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9000
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0.15
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9000
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0.09
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Public
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10299
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4172503
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67.84
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4172503
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40.71
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Total
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10326
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6150000
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100.00
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10250000
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100.00
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3.0 SUBMISSIONS IN THE EXEMPTION APPLICATION
3.1 In the aforesaid application dated June 02, 2004, the acquirers have interalia, submitted that:
a. the target company is a leading manufacture of Duplex Boards and Newsprint Papers.
b. the quality of the products and the business of the target company were affected due to the frequent power failure and load shedding by Gujarat State Electricity Board.
c. the profit of the target company to the total income during the year 2002-2003 was not even 1%.
d. in its efforts to reduce cost, the target company has decided to install a power plant at the factory premises situated at Vapi, Gujarat State, which would bring about substantial savings in cost and allow it to produce higher quantities and increase the turnover.
e. The total project cost was estimated to be Rs. 1050 lakhs, of which Rs. 700 lakhs will be by way of term loan from Bank of India and the balance Rs. 350 lakhs will be brought in by way of equity, by the promoters, by way of a preferential basis and propose to acquire additional 41,00,000 equity shares of Rs. 10 each in the paid up capital of company.
f. after the proposed acquisition, the holding of the promoters would be 57.06% of the post issue paid up capital of the target company.
4.0 CONSIDERATION OF THE APPLICATION
4.1 The aforesaid application dated June 02, 2004 was forwarded by SEBI to the Takeover Panel in terms of sub-regulation (4) of regulation 4 of the said Regulations. The Takeover Panel vide its report dated June 17, 2004 has recommended for exemption to the acquirers from making an open offer.
5.0 I have perused the documents on record and noted that the proposed acquisition of shares in the target company by the acquirers is by way of issue of equity shares on the basis of preferential allotment. It is also noted that the acquirers hold 19.21% and are already in control of the target company. Pursuant to the proposed acquisition, promoters including acquires would hold 57.06% and balance 42.94 would be with public, financial institutions / banks, foreign institutional investors/non resident Indians/overseas corporate body. There would not be any change in control subsequent to the proposed acquisition.
6.0 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 11 ( 1 ) of the said Regulations, subject to certain conditions.
7.0 ORDER
7.1 Having regard to the above, and the recommendations made by the Takeover Panel and also in the interest of the public shareholders 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 acquirers, namely Shri Nagindas R Agarwal, Smt. Suman N Agarwal, Shri Rajendra N Agarwal, Smt Reena R Agarwal, N. R. Paper & Boards Ltd., Suman Papers & Boards Ltd., Shri Saifee A. Jani, Smt Farzana Jani and Westend Paper & Board Pvt. Ltd. from making an open offer subject to the fulfilment of the following conditions.
i) The target company shall convene a general meeting of shareholders for passing a fresh special resolution under Section 81(1A) of Companies Act, 1956 for the aforesaid preferential allotment to the acquirers.
ii) The target company shall make the following disclosures in the explanatory statement u/s 173 of the Companies
Act ,1956 forming a part of the notice:
a the price at which the allotment is
proposed,
b the identity of such person(s),
c the purpose of and reason for such
allotment,
d consequential changes, if any, in the board of directors of the target company and in voting rights, the shareholding pattern of the company, and
e whether such allotment would result in change in control over the target company
iii) The acquirers shall comply with the guidelines of SEBI for Preferential Allotment, including pricing guidelines, as prescribed under Chapter XIII of SEBI (Disclosure and Investor Protection) Guidelines, 2000.
iv) The target company shall provide facility of voting through postal ballot for passing of the special resolution as per the procedure laid down for postal ballot in rule 2A and rule 5 of Companies (Passing of the Resolution by Postal Ballot) Rules, 2001. The notice to the shareholders shall also include a postage pre-paid envelope for facilitating the consent or dissent.
v) The promoters, being interested parties to the resolution, shall abstain from voting in respect of the resolution.
vi) The acquirers are also directed to:
a) file a report under regulation 3(4) of SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations, 1997, with SEBI on completion of the proposed acquisition.
b) file a certificate of auditor / independent chartered accountant to the effect that applicable provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 / conditions as stated above have been complied with along with the aforesaid report.
7.2 In case of failure of the acquirers to comply with the aforesaid conditions while making the preferential allotment, the acquirers shall be liable to make an open offer in terms of the provisions of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, without prejudice to any other action SEBI may take in terms of the provisions of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and the Securities and Exchange Board of India Act 1992.
7.3 This order shall come into force with immediate effect.
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A K BATRA
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Date: August 5, 2004
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WHOLE TIME MEMBER |
| Place: MUMBAI |
SECURITIES AND EXCHANGE BOARD OF INDIA |