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Order against Galaxy Leasings Limited

Sep 11, 2002
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Orders : Orders of Chairman/Members

CO/164/TO/09/2002

SECURITIES AND EXCHANGE BOARD OF INDIA

ORDER 

IN THE MATTER OF PROPOSED ACQUISITION OF SHARES OF GALAXY LEASINGS LIMITED

 

1.0 Mr. Nirmal Suchanti (hereinafter referred to as the "Acquirer") along with Mrs. Pushpa N. Suchanti, Mr. Vivek N. Suchanti, Mr. Vineet N. Suchanti (hereinafter referred to as the "persons acting in concert") hold 92.51% shares of Galaxy Leasings Limited (hereinafter referred to as the "Target company"). The Acquirer along with persons acting in concert propose to acquire the outstanding equity shares i.e. 7.49% from the public shareholders of the Target company. As a result of the proposed acquisition, the Acquirer will have to make an open offer to the public shareholders of the Target company in terms of sub-regulation (2) of regulation 11 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as "Regulations").

1.1 The shares of the Target company are listed on the UP Stock Exchange (hereinafter referred to as " UPSE") at Kanpur.

2.0 The Acquirer made an application dated July 25, 2002 supported by an affidavit dated July 29, 2002 to the Securities and Exchange Board of India (hereinafter referred to as SEBI) under sub-regulation (2) of regulation 4 of Regulations seeking exemption from making public offer and from compliance with the making of public announcement and provisions of Chapter III of the Regulations.

3.0 In the aforesaid application, the Acquirer submitted, inter-alia, the following:

3.1 The Acquirer and the persons acting in concert are holding 92.51% of the voting capital of the Target company.

 

3.2 The balance 7.49% shares of the Target company are held by public shareholders and the Acquirer along with persons acting in concert propose to acquire the aforesaid 7.49% shares from the public shareholders.

 

3.3 There are only 22 public shareholders in the Target company.

 

3.4 The Target company has been running in losses and it has not been paying any dividend and has accumulated losses to the extent of Rs.188.68 lacs as on 31.3.2001.

 

3.5 The shares of the Target company are not traded on UPSE since past 5 years.

 

3.6 The said offer will be made at price of Rs.2/- per share payable in cash. The shares of the Target company are infrequently traded and the price of Rs.2/- has been arrived at as per sub-regulation (3) of regulation 20 of the Regulations.

 

3.7 The proposed offer will be made by the Acquirer to the shareholders by directly approaching them through a letter under registered AD posting.

 

3.8 The consideration will be paid to the public shareholders of the Target company by way of pay order / demand draft dispatched through registered post.

 

3.9 Since there are only 22 public shareholders of the Target company, it would be very convenient to complete the procedure and save cost.

 

3.10 On completion of the said offer the Target company shall approach the stock exchange for delisting of equity shares.

 

3.11 The Acquirer has requested that in view of the aforesaid reasons it may be granted exemption from making a public announcement and from provisions of Chapter III of the Regulations specifically sub-regulation (2) of regulation 11 of the Regulations.

4.0 The said application was forwarded to the Takeover Panel on August 2, 2002 in terms of sub-regulation (4) of regulation 4 of the Regulations. The Takeover Panel vide its report dated August 13, 2002 has recommended, inter alia, as under:

"In view of the fact that 92.51% of the share capital of the target company is already held by the acquirer and persons acting in concert and that there are only 22 shareholders of the target company holding the remaining 7.49% of the share capital intended to be acquired, grant of exemption as sought is recommended subject, however, to the acquirer –

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    1. making individual offers to each of the remaining shareholders by directly addressing Offer letters offering to buy the shares at the price of Rs.2/- per share;

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    2. sending such letters to each of such shareholders at the recorded addresses by registered acknowledgement due post;

 

(iii) submitting of certificate of auditor / independent Chartered Accountant to the effect that the offer letters were so posted; and

 

(iv) complying with other conditions as proposed in the application."

 

5.0 I have taken into consideration the application dated 25.7.2002 the material available on record and the recommendations of Takeover Panel.

 

5.1 I have noted that the shares of Target company are listed only at UPSE and have not been traded for last five years. The book value per share is nil as on 31.3.2001.

 

5.2 I have noted that the offer price of Rs.2/- per share to be paid to the public shareholders has been justified on the basis of parameters given in sub-regulation (3) of regulation 20.

 

5.3 It is observed that the Acquirer along with persons acting in concert are holding 92.51% shares of the Target company. That there are only 22 public shareholders in the Target company who hold 7.49% shares of the Target company.

 

5.4 I also note that the Acquirer has submitted that he is willing to write individually to the 22 public shareholders who hold 7.49% shares in the Target company and to purchase their shares at Rs.2/- per share payable in cash.

 

5.5 It is also noted that the Panel has recommended grant of exemption to the Acquirer subject to:

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    1. making individual offers to each of the remaining shareholders by directly addressing Offer letters offering to buy the shares at the price of Rs.2/- per share;

      2.  

    2. sending such letters to each of such shareholders at the recorded addresses by registered acknowledgement due post;

      3.  

    3. submitting of certificate of auditor / independent Chartered Accountant to the effect that the offer letters were so posted; and

 

6.0 Taking into consideration the above, the recommendations of the Takeover Panel and the interest of the public shareholders of the Target company, in exercise of the powers conferred upon me under sub-section (3) of Section 4 of the Securities and Exchange Board of India Act, 1992 read with sub-regulation (6) of regulation 4 of the Regulations, I hereby grant exemption, to the Acquirer from complying with the provisions as contained in Chapter III of the Regulations with regard to the proposed open offer to be made to the public shareholders of the Target company for acquisition of 75,000 shares representing 7.49% in terms of sub-regulation (2) of regulation 11 of the Regulations, subject to the Acquirer -

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    1. making individual offers to each of the remaining shareholders by

      2.  

directly addressing Offer letters offering to buy the shares at the price of Rs.2/- per share;

 

(ii) sending such letters to each of such shareholders at the recorded addresses by registered acknowledgement due post;

 

(iii) submitting of certificate of auditor / independent Chartered Accountant to the effect that the offer letters were so posted; and

 

  1. The Acquirer is also directed that the proposed offer be completed within 3 months from the date of passing of this order and a status report on the same shall be filed by the Acquirer with the Board within 15 days of completion of the offer.

    2.  

Date: 11th September, 02     G.N. BAJPAI

Place: Mumbai CHAIRMAN