Order against Manorath Mercantiles Limited

1.0 M/s. Harish Investments Pvt. Ltd.(hereinafter referred to as the "Acquirer") along with deemed persons acting in concert hold 89.69% shares of M/s. Manorath Mercantiles Ltd. (hereinafter referred to as the "Target company"). The Acquirer  alongwith deemed persons acting in concert propose to acquire the balance 10.31% shares(i.e,43,420 equity shares) of the Target company from the remaining public shareholders. The Acquirer would be required to make an open offer to acquire the said shares in terms of sub-regulation (2) of regulation 11 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as " the Regulations").

(i)The Acquirer along with the persons acting in concert are presently holding 89.69% of total paid-up share capital of the Target company.

(ii) The Acquirer proposes to acquire 10.31% shares of the Target company from the remaining 63 public shareholders at a price of Re 52/- per share.

(iii) The majority of public shareholders are willing to offer their shareholding.

(iv) The estimated cost of public announcement would be higher than the total consideration for the proposed acquisition.

(v) The price offered by acquirer is highest in terms of Regulation 20(3).

(vi) The Acquirer is desirous of consolidating his holding in order to delist the shares of the Target company, from the Exchange.

(vii) The exemption would not be contrary to the public interest, as the majority of public shareholders are willing to offer their shareholding.

(viii) Mr. Harsh Vardhan Kanoria, one of the deemed persons acting in concert had filed a report under regulation 3(4) of the Regulations in respect of acquisition of 2,39,030 shares on 30.04.2002 resulting in his shareholding increasing from 1,01,790 shares (24.17%) to 3,40,820 shares (80.93%). The submissions in this regard were found to be in order and the same was taken on record under intimation to the Acquirer.

3.0 The said application was forwarded to the Takeover Panel on  September 05 , 2002 in terms of sub-regulation(4) of regulation 4 of the Regulations. The Takeover Panel vide its report dated September 12, 2002  has recommended, inter alia, as under:

"The Acquirer along with the persons deemed to be acting in concert are already holding 89.69% of the equity capital of the Target company and thus only 10.31% of the equity capital is held by the public who are said to be only 63 in number. The acquisition of the balance shareholding that is, 10.31% of the equity capital of the Target company presently held by public shareholders is not for acquisition of control of the target company as the Acquirer along with the persons deemed to be acting in concert are already in control of the Target company. In the facts of the case, grant of exemption as sought is recommended subject to the Acquirer:-

(i) making individual offers to each of the remaining shareholders by directly addressing offer letters offering to buy the shares held by such shareholders in the target company;

(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;

(iv) offering the minimum price per share calculated in accordance with Regulation 20 of the Takeover Code but in any event not less than Rs. 52/- (per) share."

4.0I have taken into consideration the application dated 03.09.2002, the facts and material available on record and also the recommendations of the Takeover Panel.

4.1It is observed that the public shareholding in the Target company is 10.31% of the total paid-up capital of the Target company held by 63 shareholders. The Acquirer is a part of the promoter group and holds 5.15% of the paid-up capital of the Target company and the Acquirer along with persons deemed to be acting in concert holds 89.69% of the paid-up capital of the Target company. I find that there will be no change in control / management of the Target company by virtue of the acquisition of shares by the Acquirer from the public shareholders since the Acquirer along with the persons acting in concert is already holding 89.69% of the paid-up capital of the Target company and the Acquirer proposes to acquire all the outstanding public shareholding of the Target company. The Acquirer is only consolidating its shareholding in the Target company.

4.2 It is submitted that there are only 63 public shareholders and the Acquirers had been approached by majority of the public shareholders expressing their willingness to offer their shareholding at not less than Rs. 10/- per share.

4.3It is observed that the book value per share of the Target company is Rs 51.87 per share as on 31.3.2002. The offer price of Rs.52/- per share appears to be justified in terms of sub-regulation (3) of regulation 20 of the Regulations.

4.4Taking into consideration the facts of the case, the recommendations of the Takeover Panel and the interest of the public shareholders of the Target company, I, 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 for the reasons recorded hereinabove, hereby grant exemption to the Acquirer from complying with the following provisions of 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 10.31% of the paid-up capital of the Target company -

(i)Appointment of merchant banker as required under regulation 13.

(ii)Timing of the public announcement of the offer as required under regulation 14.

(iii)Public announcement of the offer as required under regulation 15.

(iv)Contents of the public announcement of the offer as required under regulation 16.

(v)Submission of letter of offer to the Board as required under regulation 18.

The above exemptions shall be subject to the following conditions:-

(a) the acquirer shall make individual offers to each of the remaining shareholders by directly addressing offer letters offering to buy the shares held by such shareholders in the target company;

(b) such letters of offer shall be sent to each of such shareholders at the recorded addresses by registered acknowledgement due post;

(c) the Acquirer shall submit the certificate of auditor / independent Chartered Accountant to the effect that the offer letters were so posted;

(d) 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.
 

Date: September 27th, 2002        

Place: Mumbai    

G.N. BAJPAI

CHAIRMAN