Order in the matter of proposed acquisition of equity shares of Parenteral Drugs (India) Limited

SECURITIES AND EXCHANGE BOARD OF INDIA 

ORDER

WTMO/30/CFD/07/2006

1.0 BACKGROUND -

1.1 M/s Parenteral Drugs (India) Ltd. (hereinafter referred to as ‘the target company’) is a company limited by shares incorporated under the Companies Act, 1956, having its registered office at Shri Ganesh Chambers, Navlakha Crossing, Indore – 452 001, Madhya Pradesh. The equity shares of the target company are listed on the Bombay Stock Exchange Ltd. (BSE) and the Madhya Pradesh Stock Exchange Ltd. (MPSE).

1.2 PDPL Holdings Pvt. Ltd. and PDPL Securities Pvt. Ltd. (hereinafter collectively referred to as ‘the acquirers’) are stated to be the two private limited companies promoted, formed and registered under the Companies Act, 1956 by the individual promoters of the target company i.e. Shri Manohar Lal Gupta, his family members and persons acting in concert.  The acquirers propose to acquire 20, 35,735 (36.35%) equity shares of the target company from the individual promoters.

2.0 APPLICATION FOR EXEMPTION -

2.1 Vide letter dated April 04, 2006 the acquirers, filed an application with the Securities and Exchange Board of India (SEBI) under regulation 4(2) read with regulation 3(1) (l) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 (hereinafter referred to as “the Takeover Regulations’) seeking exemption from the applicability of Regulation 10 of the Takeover Regulations with respect to the proposed acquisition of 36.35% shares in the target company from the individual promoters.  Subsequently, vide letter dated 22.04.06, the acquirers made further submissions.

2.2 The acquirers have inter alia made the following submissions: -

a). The shareholding of the promoter group in the target company is 85.64% out of which 36.35% is held by the individual promoters, 04.29% is held by their friends and relatives and remaining 45% is held by the body corporates.

b). The individual promoters had formed two partnership firms on 10.02.06 for the purpose of consolidation of their individual holding. All the partners of the partnership firms are the promoters of the target company. All the partners of these two partnership firms contributed their shareholding in the target company to the partnership firms as part of their capital contribution. The partnership firms were registered on 16.02.06 as M/s. Gupta Brothers and M/s. Gupta & Garg Brothers.

c). On 09.03.06 M/s. Gupta Brothers was converted into a company as PDPL Holdings Pvt. Ltd. and M/s. Gupta & Garg Brothers was converted into a company as PDPL Securities Pvt. Ltd. All the shares (36.35%) held by the individual promoters in their capacity as partners of the respective partnership firms will be held by these two companies (the acquirers) pursuant to the proposed acquisition. The acquirers in turn would allot their shares in the same proportion to the individual promoters of the target company.

d) The acquirers are persons acting in concert for the purpose of the proposed acquisition and are “Promoters” within the meaning of the regulation 2 (1) (h) of Takeover Regulations. They do not hold any shares in the target company before the proposed acquisition. Pursuant to the proposed acquisition, the shareholding of the acquirers would increase from 0% to 36.35% of the equity shares of the target company and the holding of the promoter group would remain the same in the target company i.e. 85.64%. Thus, the holding of the promoter group is not going to be diluted or enhanced by the proposed acquisition.

e). The acquisition is a private arrangement amongst the promoters and is a family affair. The shares are only changing hands from individual to private limited companies, formed, for the purpose of consolidating the shares of the individual promoters.

f).  The proposed acquisition is only with an objective of consolidation of the promoters holding in the target company and which would give more stability to the target company.

g). The shareholding of the promoters in the acquirers would be in the same proportion in which they are holding shares in the target company and therefore, there is no change in the holding pattern of the promoters.

h).  That the promoters will not be transferring their shareholding in the acquirer companies and the proposed acquisition will ultimately result into benefits to the shareholders of the target company at large.

i). The acquirer companies are promoted, owned and controlled by the individual promoters of the target company. Pursuant to the proposed acquisition there will not be change in control over the target company and even after the acquisition, the control over the target company shall remain with the existing promoters.

j). The share market value of the target company is not going to be affected due to the proposed acquisition.

2.3 The shareholding pattern of the target company before and after the proposed acquisition is as under:

 

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
Promoter group	41	4796100	85.64	4796100	85.64
Acquirers*	2*	Nil	Nil	(2035735)*	(36.35)*
FIs/Banks/MF	6	3900	0.07	3900	0.07
FIIS/NRIs/ OCBs	11	6117	0.09	6117	0.09
Public	3704	793883	14.20	793883	14.20
Total	3764	5600000	100.00	5600000	100.00

 

* Included in the shareholding of the promoter group

 

3.0 RECOMMENDATION OF THE TAKEOVER PANEL –

3.1 The aforesaid application and the letter dated April 22, 2006 sent by the acquirers were forwarded by SEBI to the Takeover Panel in terms of sub-regulation (4) of Regulation 4 of the Takeover Regulations. The Takeover Panel vide its report dated May 11, 2006 has recommended as following –

“The panel considered the pros and cons of the acquisition application. The shares are only changing hands to individual promoters of private limited company and promoter group’s holding is not diluted. The panel does not find any difficulty in recommending exemption. Moreover the acquisition is for the purpose of consolidation, strengthening of the holding of promoters and for giving more stability to the target company. There is resultant benefit to the shareholders of the target company………..”

4.0 FINDINGS -

4.1      I have carefully considered the application dated April 04, 2006, the letter dated April 22, 2006 sent by the acquirers and have taken into consideration the above mentioned recommendation of the Takeover Panel and relevant material available on record.

4.2 I note that the majority of the shares (85.64%)  of the target company are held by one Shri Manohar Lal Gupta, his family members, relatives and friends  and the companies controlled by the said ‘Gupta family’ and the target company is controlled by them. The individual promoters other than relatives and friends hold 36.35% shares in the target company. The proposed acquisition of 36.35% shares in the target company by the acquirers from the individual promoters would attract regulation 10 of the Takeover Regulations unless exempted under regulation 3 thereof.

4.3 I note that in the process of proposed acquisition, the shares of the target company as held by the individual promoters will be held by the acquirer companies formed and controlled by the said individual promoters. I also take note of the submission that the individual promoters control the acquirer companies and even after the proposed acquisition they will remain in control and they will not transfer their shareholding in the acquirer companies. In view of this, I find that the promoter group which includes the acquirers will remain in control of the target company and there would not be any change in control of the target company pursuant to the proposed acquisition.

4.4 In view of the above facts and circumstances, I agree with the recommendations of the Takeover Panel and consider the present case a fit case for granting exemption from complying with the requirements as specified under regulation 10 of the Takeover Regulations.

5.0 ORDER -

5.1  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 acquirers, namely M/s PDPL Holdings Pvt. Ltd. and M/s PDPL Securities Pvt. Ltd. from complying with the provisions of regulation 10 of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 with regard to the proposed acquisition of 20,35,735 (36.35%) equity shares of the target company.  This order is limited for the purpose of exemption from applicability of regulation 10 of the Takeover Regulations in respect of the proposed acquisition. This order does not affect the applicability of any other law.

5.2 The proposed acquisition shall be completed within 30 days of this order and the acquirers shall file a report with SEBI  in the manner specified  in regulations 3(4) and 3 (5) of the SEBI (Substantial Acquisition of Shares and Takeover Regulations), 1997.

 

Place : Mumbai	T. C. NAIR
Date : 25.07.2006	WHOLETIME MEMBER
	SECURITIES AND EXCHANGE BOARD OF INDIA