In The Matter Of Proposed Acquisition Of Shares Of Shriram Pistons And Rings Ltd

SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER

WTMO/ 13/CFD/ 11 /2005

 

1.0 BACKGROUND

 

1.1 Shriram Pistons and Rings Ltd. (hereinafter referred to as ‘the target company’) is a public limited company incorporated under the Companies Act, 1956, having its office at 3^rd Floor, Himalaya House, 23, K.G.Marg, New Delhi - 110001.

1.2 The equity shares of the target company are listed on the Delhi Stock Exchange.

 

2.0 APPLICATION FOR EXEMPTION

 

2.1           Deepak Shriram Family Benefit Trust (hereinafter referred to as ‘the acquirer’) submitted  an application vide its letter dated 11.8.04 under Regulation 4(2) of the SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 (hereinafter referred to as ‘the Takeover Regulations’), seeking exemption from the compliance of Regulations 10, 11 and 12 of the Takeover Regulations with respect to the proposed acquisition of 66,69,336 equity shares, of the target company by way of gift by Shri Deepak C. Shriram and Shri Sanjiv Dass (hereinafter referred to as ‘the transferors’) in their individual capacity to the acquirer.

 

3.0 SUBMISSIONS IN THE EXEMPTION APPLICATION

3.1 The present paid up equity share capital of the target company is Rs.2,23,74,9120 divided into 2,23,74,912 equity shares of face value of Rs.10 each. The shareholding of the acquirer in the target company is currently nil.

3.2 In respect of the said acquisition of 66,69,336 (29.81%) equity shares of the target company, the acquirer has sought exemption from making an open offer in terms of Takeover Regulations. The exemption is sought in view of the following:

i.        The acquirer is a family benefit trust wherein there are four trustees out of which two of the trustees are transferors in the acquisition under reference.

ii.      All the beneficiaries of the trust are Shri Deepak C. Shriram and his relatives covered under Section 6 of the Companies Act, 1956.

iii.    The proposed acquisition is by way of gift of their joint shareholding (29.81%) by the two trustees i.e:- the transferors, who are also promoters of the target company.

iv.     These two joint shareholders propose to gift their joint shareholding which is 29.81% in their individual capacity to the acquirer.

v.       Post proposed acquisition, the shareholding of the promoter group would remain at 47.76% as the Trust, which is the acquirer, is also covered in the promoter group category.

4.0 RECOMMENDATION OF THE TAKEOVER PANEL  

 The aforesaid application dated 11.8.04 was forwarded to the Takeover Panel in terms of sub-regulation (4) of regulation 4 of the Takeover Regulations. The Takeover Panel, vide its report dated 7.4.05, has recommended as under –

 

 “The proposed acquisition is from two joint shareholders, who are promoters of the target company, who propose to gift these shares to the Acquirers, a family benefit trust consisting of four trustees, two of them being close relatives of the transferors. All beneficiaries of the said family trust are family relatives.

 

In the facts stated, grant of exemption as sought is recommended.”

 

5.0 FINDINGS

 

5.1           I have carefully gone through the application dated 11.8.04 and taken into consideration the relevant material available on record and the above mentioned recommendation of the Takeover Panel.

 

5.2 The acquirer has submitted that the proposed acquisition is not for the purpose of acquiring control and management over the target company as the proposed transfer is from the two existing joint promoter shareholders of the target company to themselves in the capacity of Trustees of a family trust owned and controlled by them/their relatives.

 

5.3 From the application, it is observed that the current shareholding pattern of the target company along with the shareholding subsequent to the proposed acquisition would be as under:

Shareholder’s category	No. of registered shareholders as on date of application	Before the proposed acquisition				After the proposed acquisition
		No. of shares/total voting rights held		% of shares total voting capital held.		No. of shares / voting rights		% of shares/voting rights
Equity Shares
Promoters including Acquirer	7		1,06,86,312		47.76	40,16,976	17.95
	-		-		-	66,69,336	29.81
FIs/Banks	3		62,27,232		27.83	62,27,232	27.83
FIIs/NRIs/OCBs	-		-		-	-	-
Foreign Collaboration	2		52,58,457		23.50	52,58,457	23.50
Public	169		2,02,911		0.91	2,02,911	0.91
Total	181		2,23,74,912		100	2,23,74,912	100

 

5.4            In view of the above facts and circumstances, taking the application dated 11.8.04 and the recommendations of the Takeover Panel into consideration, the present case is fit for granting exemption from making a public offer, as required under Regulation 10 of the Takeover Regulations.

5.5 I note that the transferors had earlier acquired shares (representing 29.81% of voting right) of the target company on 30.10.03 pursuant to inter se transfer of shares amongst the promoters of the target company. In respect of the said acquisition the transferors have filed report under Regulation 3(4)of the Takeover Regulations. The exemption granted in respect of the proposed acquisition as sought by the application dated 11.8.04 shall not absolve the transferors from their obligations under relevant provisions of the Takeover Regulations as applicable to earlier acquisition.

6.0 ORDER

6.1 In view of the above findings, 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 Deepak Shriram Family Benefit Trust, from complying with the Chapter III of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, with regard to making open offer in the case of the proposed acquisition of 66,69,336 (29.81%) equity shares. However this exemption is granted without prejudice to the rights of SEBI to take any action for violation, if any, of the Takeover Regulations, in respect of the acquisition of shares by the transferors as stated in para 5.5.

6.2 The acquirer shall complete the transaction within thirty days from the date of the order and file a report with SEBI in the manner specified in Regulation 3(4) read with 3(5) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

 

 

	MADHUKAR
PLACE : MUMBAI DATE : NOVEMBER 11, 2005	WHOLE-TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA