Order in respect of acquistion of shares of HCL Technologies Ltd

SECURITIES AND EXCHANGE BOARD OF INDIA

 ORDER

 

 IN THE MATTER OF PROPOSED INDIRECT ACQUISITION OF SHARES OF HCL TECHNOLOGIES LIMITED - EXEMPTION APPLICATION FILED UNDER REGULATION 4 (2) OF THE SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997.

 

 

WTMO/133/CFD/01/2005

 

1.0       BACKGROUND

 

1.1       HCL Technologies Ltd. (hereinafter referred to as ‘the target company’) having its registered office at 806 Siddharth, 96 Nehru Place, New Delhi 110 019, is a company registered under the Companies Act, 1956.  The shares of the target company are listed on the National Stock Exchange and the Stock Exchange Mumbai.   

 

2.0       APPLICATION FOR EXEMPTION

 

2.1       Ms. Roshni Nadar, the daughter of Shri Shiv Nadar, one of the promoters of the target company (hereinafter referred to as ‘the acquirer’) filed an application dated November 26, 2004 through Amarchand & Mangaldas & Suresh A. Shroff & Co., Advocates & Solicitors, under regulation 4(2) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as ‘the Takeovers Regulations’), with Securities and Exchange Board of India (hereinafter referred to as SEBI). The said application is filed seeking exemption from the applicability of Regulations 10 and 12 of the Takeovers Regulations for the proposed indirect acquisition of 6,11,29,604 equity shares (20.62%), of the target company by way of a gift by her uncle, Dr. S N Balakrishnan.  

 

 

3.0       SUBMISSIONS IN THE EXEMPTION APPLICATION

 

3.1    a)  the target company has been promoter by Shri Shiv Nadar.

 

b) Dr. S N Balakrishnan, a non-resident Indian holds the entire share           capital of M/s Vama Sundari Investment Pvt. Ltd.

 

         c) M/s Vama Sundari Investment Pvt. Ltd. holds 100% of the shares of IT Con Investment Private Limited, Mauritius which in turn holds 100% of the shares of HCL Holdings Private Limited (previously known as Wintech Investment Private Limited).

 

         d) HCL Holdings Private Limited presently holds 20.62% of the equity shares of the target company.  HCL Holdings Private Limited has been a shareholder for the last six years.   

 

         e) the acquirer at present is holding 87 shares of the target company.

 

f) Dr. S N Balakrishnan is desirous of transferring the entire shares of              M/s Vama Sundari Investment Pvt. Ltd. to the acquirer as a gift on her attaining majority.  As a result the 20.62% shareholding of HCL Holdings Pvt. Ltd.  in the target company is proposed to be indirectly transferred to the acquirer. 

 

         g) there would be no change in management or control of the target company by virtue of the transfer since the shares would continue to be held by persons acting in concert with the promoter. 

 

         h) the only consequence of the transfer would be that shares of the target company which were hitherto indirectly held by the brother of the promoter, would be held by the daughter of the promoter and consequently, HCL Holdings Private Limited would continue to be deemed as a person acting in concert with the promoter for the purpose of Regulation 8(2) of the provisions of the Takeovers Regulations and the total shareholding of the promoter group would continue to be 75.77%.     

 

         i) the primary purpose of the transfer is to transfer the shares by way of gift and there is not commercial objective in the transfer.

 

         j) the transfer being an internal reorganization and entailing no change in management or control of the target company, would in no way affect  or prejudice the other shareholders of the target company.

 

         k)  exempt the acquirer from making a public announcement under regulation 10 of the Takeovers Regulations consequent to the transfer of shares of M/s Vama Sundari Investment Limited, Mauritius by way of a gift from her uncle Dr. S N Balakrishnan. 

 

3.2             The shareholding pattern of the target company before and after the proposed acquisition is as follows:

       ** The acquirer being the daughter of the promoter is classified under the promoter group and the transferor, brother of the promoter, who is the beneficial owner of proposed transfer of 61129604 shares of the target company through a gift to his niece, is also part of the promoter group and hence there is no change in the number of shares and percentage of holding of the promoter group before and after the proposed transfer.

4.0       RECOMMENDATION OF THE TAKEOVER PANEL  

4.1       The aforesaid application dated November 26, 2004 was forwarded to the Takeover Panel in terms of sub-regulation (4) of regulation 4 of the Takeovers Regulations. The Takeover Panel vide its report dated December 13, 2004 has recommended as under –

 “On the facts stated in the Application, and there being no likelihood of any change in management and control of the target company by virtue of transfer since the shares would continue to be held by persons acting in concert with the promoter and further the primary purpose of the transfer is to transfer the shares by way of gift, there being no commercial objective in the transfer, the grant of exemption as sought is recommended.”

5.0       FINDINGS

5.1             I have gone through the application dated November 26, 2004 and taken into consideration the relevant material available on record and the above mentioned recommendation of the Takeover Panel. I observe that the acquirer had sought an exemption from the provisions of regulations 10, and 12 of the Takeover Regulations with respect to the indirect acquisition of shares of shares of 6,11,29,604 equity shares (20.62%), of the target company, proposed to be transferred to the acquirer by Dr. S N Balakrishnan by way of gift.

5.2             In this regard, I note that the proposed transaction of gift of shares is from Dr. S N Balakrishnan who is a part of the promoter group to the acquirer, daughter of Shri Shiv Nadar, one of the promoter who is also the brother of the donor.  I agree with the submissions made on behalf of the acquirer that the only consequence of the transfer would be that shares of the target company which were hietherto indirectly held by the brother of the Promoter, would be held by the acquirer.  Consequently, HCL Holdings Pvt. Ltd. would continue to be deemed as a person acting in concert with the Promoter for the purpose of Regulation 8(2) of the provisions of the Takeovers Regulations and the total shareholding of the promoter group would continue to be 75.77%. In view of the above I find that regulation 12 of the Takeovers Regulations will not be attracted in the proposed gift transaction.  Therefore any exemption from the applicability of regulation 12 of Takeovers Regulations will not be required.

5.3             I also observe that there would not be any change in control pursuant to the proposed acquisition. It is observed that HCL Holding Pvt. Ltd. is an indirect wholly owned subsidiary of M/s Vama Sundari Investments Pvt. Ltd. Dr. Balakrishnan holds the entire share capital of the said M/s Vama Sundari Investments Pvt. Ltd. The said HCL Holding Pvt. Ltd. holds 20.62% of shares of the target company. I have also noted that Dr. S N Balakrishnan proposes to transfer to the acquirer by way of gift the entire shareholding of M/s Vama Sundari Investments Pvt. Ltd. which would result in the indirect acquisition of 20.62% of shares of the target company. I have also observed that the aforesaid gift was made by the uncle to his niece.

5.4             In view of the above facts and circumstances, I agree with the recommendations of the Takeover Panel and consider the present case as a fit case for granting exemption from making a public announcement as required under regulation 10 of the Takeover Regulations.

ORDER

6.0        In view of the above findings, I, in exercise of the powers conferred upon me by virtue of 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 Ms. Roshni Nadar from complying with the provisions of Regulation 10 of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 with regard to the proposed indirect acquisition of 6,11, 29,604 equity shares (20.62%) of HCL Technologies Ltd., which is acquired due to the gift transaction of the entire holdings of Dr S N Balakrishnan, in M/s Vama Sundari Investments Pvt. Ltd.      

6.1             The acquirer shall complete the proposed transaction within 30 days from the date of the order and shall file a report to SEBI in the method and manner as specified under regulation 3(4) read with regulation 3(5) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

                                                                                                                              MADHUKAR

Place:  Mumbai                                                                                                    Whole Time Member

Date: January 19, 2005                                                                                       Securities and Exchange Board of India