SECURITIES AND EXCHANGE BOARD OF INDIA
ORDER
IN THE MATTER OF PROPOSED ACQUISITION OF SHARES OF AMIT SPINNING INDUSTRIES LIMITED (EXEMPTION APPLICATION FILED UNDER REGULATION 4(2) OF THE SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997.
WTMO/AKB/CFD/ 27/07/04
1.0 BACKGROUND
1.1 Amit Spinning 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 Lotus House, 5th floor, 33 – A, New Marine Lines, Mumbai. Shri Bharat P Shah is the promoter director of the target company.
1.2 The equity shares of the target company are listed on the Stock Exchange, Mumbai, National Stock Exchange of India Ltd. and Delhi Stock Exchange Association Ltd.
1.3 Shri Bharat P Shah, Smt. Smita Bharat Shah, Shri Amit Bharat Shah and Kum. Aparna Bharat Shah are a part of the promoter group of the target company [hereinafter collectively referred to as ‘the acquirers’]. The promoter group (including the acquirers) are holding 37.40% of the paid up equity share capital of the target company. The target company had incurred substantial losses during the years 2001-2002 and 2002-2003. At the request of the company, financial institutions and banks (Joint lenders) approved the financial package for restructuring the debt of the target company under the Corporate Debt Restructuring mechanism, with certain conditions, which interalia requires the promoters to issue fresh equity of Rs. 2 crores and also to convert their existing holding of Rs. 3 crore preference shares into equity. Accordingly, the acquirers by way of preferential allotment, propose to acquire additional 1,00,00,000 equity shares of Rs. 5 each, in the paid up capital of company. After the proposed acquisition, the holding of the acquirers, together with the persons acting in concert, would be 59.68% of the post issue paid up capital of the target company.
2.0 APPLICATION FOR EXEMPTION
2.1 The acquirers made an application dated May 10, 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 1,00,00,000 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 acquirers and persons acting in concert in the target company would increase by 22.28% to 59.68% 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:
| Shareholders category |
Number of registered shareholders as on date of application |
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 |
| A. Promoter group
i. Acquirer Promoter
ii. Non-Acquirer Promoter
|
4
51
|
2770920
3994703
|
15.32%
22.08%
|
12770920
3994703
|
45.46%
14.22%
|
| Sub-Total (A) |
55 |
6765623 |
37.40% |
16765623 |
59.68 |
| B. FIs / Banks / Private Corporate Bodies |
152 |
2490208 |
13.76% |
2490208 |
8.87% |
| FIIs/NRIs/OCBs |
1165 |
2848675 |
15.75% |
2848675 |
10.14% |
| Public |
21546 |
5985494 |
33.09% |
5985494 |
21.31% |
| Sub – Total (B) |
22863 |
11324377 |
62.60% |
11324377 |
40.32% |
| Grand Total
A+B
|
22918 |
18090000 |
100% |
28090000 |
100% |
3.0 SUBMISSIONS IN THE EXEMPTION APPLICATION
In the aforesaid application, the target company interalia, submitted that:
a. it incurred substantial losses during the years ending March 31, 2002 and March 31, 2003, for certain specified reasons, including labour strike, huge overhead costs etc. and it had incurred cash losses for the first time in its history.
b. it had approached financial institutions and banks, together called Joint Lenders, for restructuring its debts under the Corporate Debt Restructuring (CDR) mechanism.
c. the joint lenders had approved the CDR package proposed by it subject to certain conditions.
d. the CDR package interalia provides for writing down of equity share capital by 50% and infusion of additional capital by promoters to the tune of Rs. 2 crores. The CDR package further provides for conversion of preference shares held by the promoters aggregating to Rs. 3 crores into equity shares of the company.
e. the shareholding pattern of the promoters after the CDR package would be 59.68%. Further, there will not be any change in management and control of the company due to the implementation of the CDR package.
4.0 CONSIDERATION OF THE APPLICATION
4.1 The aforesaid application dated May 10, 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 May 27, 2004, has recommended grant of exemption to the acquirers, from making an open offer.
4.2 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 preferential allotment in terms of the debt restructuring proposal, as approved by Corporate Debt Restructuring cell, for revival of the target company. It is also noted that the acquirers, along with other promoters, hold 37.40% shares and are already in control of the target company. The balance 62.60% is held by public shareholders including foreign institutional investors, financial institutions, banks and non-resident Indians, as per the shareholding pattern in para 2.2. Pursuant to the proposed acquisition, acquirers along with other promoters would hold 59.68% and balance 40.32 would be with public. Thus, there would be no change in control pursuant to the proposed acquisition.
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 11 ( 1 ) of the said Regulations, subject to certain conditions.
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 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 Bharat P Shah, Smt. Smita Bharat Shah, Shri Amit Bharat Shah, Kum. Aparna Bharat Shah 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 said 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 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.
5.2 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.
5.3 This order shall come into force with immediate effect.
| |
A.K.BATRA |
|
Date: July 9, 2004
|
WHOLE TIME MEMBER |
| Place: MUMBAI |
SECURITIES AND EXCHANGE BOARD OF INDIA |