Order againt Hindustan Copper Limited

SECURITIES AND EXCHANGE BOARD OF INDIA 

ORDER

IN THE MATTER OF PROPOSED ACQUISITION OF SHARES OF HINDUSTAN COPPER LIMITED (EXEMPTION APPLICATION FILED UNDER REGULATION 4 (2) OF THE SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997

 MO/96/CFD/10/04 

1.0       BACKGROUND

1.1       Hindustan Copper 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 Tamra Bhavan, 1, Ashutosh Chowdhury Avenue, P. B. No. 10224, Kolkata – 700 019.

1.2       The equity shares of the target company are listed on the Calcutta Stock Exchange Association Ltd., Mumbai Stock Exchange, Delhi Stock Exchange Association Ltd., Madras Stock Exchange and Ahmedabad Stock Exchange. 

1.3       The target company was incorporated on November 09, 1967 under the Companies Act, 1956.  The target company is the sole producer of primary copper in the country and was established to take over from National Mineral Development Corporation Limited, all plants, projects, schemes and studies pertaining to the exploration and exploitation of copper deposits, including smelting and refining, for fulfilling long-term objectives of the nation, viz. Development and growth of copper mining industry on sound lines and to maximise indigenous production of copper metal. 

1.4       The Government of India (hereinafter referred to as ‘the acquirer’) is presently holding 98.95% of the target company’s existing paid up equity capital of 362.878 crores and 100% of the preference share capital of the target company.  The target company proposes to issue equity shares to the acquirers after shareholders’ approval and the shares will be issued in the name of the President of India.  Post proposed acquisition the Government will hold 99.478% in the target company.   

2.0             APPLICATION FOR EXEMPTION

2.1             The target company made an application dated August 30, 2004 on behalf of the acquirer (as authorised by Ministry of Coals & Mines, Government of India) 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 shares by the acquirer (in the name of President of India), by passing a special resolution under Section 81 of the Companies Act, 1956, against the pending share application money of Rs. 365.34 crore received from the acquirer.  

 As per the aforesaid application, the shareholding pattern of the target company before and after the proposed acquisition, is as follows:

3.0       SUBMISSIONS IN THE EXEMPTION APPLICATION

In the aforesaid application dated August 30, 2004, it was submitted that:

1.                  the target company was applying to seek exemption from applicability of Regulation 10 and 11(2) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 which are being triggered due to the further issue of 36,53,40,000 equity shares or Rs. 10/- each in the name of the President of India against the budgetary support of Rs. 365.34 crore  already received by the target company .

2.                  a) the acquirer at present was already holding 98.95% of the target company’s existing paid up capital of Rs. 362.878 crore and the floating stock of the target company’s shares in the market was very minimal and the triggering    of the said Regulations due to further allotment of shares in the name of the President of India is a mere technicality.

b) further issue of shares by the target company in the name of President of India was not going to affect investors’ interest since the shares are being issued to the Government of India.

4.0       CONSIDERATION OF THE APPLICATION

4.1       The aforesaid application dated August 30, 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 September 09, 2004 had recommended for exemption as sought by the acquirers with an observation that “it appars that the acquirer is already holding 98.95% of the paid up equity capital of the target company and invested large amounts with the target company over a period of time which is lying with the target company and intended to be converted into equity shares by further issue of equity shares to the Acquirer.  Moreover, the acquirer appears to have helped the target Company by giving grant-in-aid.”       

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 preferential allotment. It is also noted that the acquirer at present holds 98.95% of the paid up equity capital of the target company.  The balance is held by public shareholders including foreign institutional investors, financial institutions, banks and non-resident Indians. Thus, there would be no change in control pursuant to the proposed acquisition and also found that the interest of investors are not affected by 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 (2) of the said Regulations

ORDER

7.0       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 acquirer, namely Government of India from complying with provisions of Chapter III of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 with regard to the proposed acquisition of 36,53,40,000 equity shares of the target company. 

8.0       This order shall come into force with immediate effect.