SECURITIES AND EXCHANGE BOARD OF INDIA
ORDER
IN THE MATTER OF PROPOSED ACQUISITION OF STARLINE ISPAT AND ALLOYS LTD. - EXEMPTION APPLICATION FILED BY THE ACQUIRERS UNDER REGULATION 4 OF THE SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997
NO. : CO/204 /TO/09/2002
1.0 Mr. Nirmal Chand Suchanti (hereinafter referred to as the "Acquirer") along with Mrs. Pushpa N. Suchanti , Mr. Vivek
.Suchanti and Mr. Vineet N. Suchanti ( hereinafter referred to as the "persons acting in concert") hold 50.50% shares (i.e,5,05,030 equity shares) of Starline Ispat and Alloys Ltd. (hereinafter referred to as the "Target company"). The Acquirer alongwith persons acting in concert propose to acquire 49.50% shares(i.e, 4.95,000 equity shares) of the Target company from the public shareholders. The Acquirer would be required to make an open offer to acquire the said shares of the Target company in terms of sub regulation (1) of regulation 11 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as " the Regulations").
1.1 The shares of the Target company are listed at the Guwahati Stock Exchange( The Exchange).
2.0 The Acquirer made an application dated August 29, 2002 under sub-regulation (2) of regulation 4 of the Regulations to the Securities and Exchange Board of India (hereinafter referred to as 'the Board') seeking exemption from making public offer and from compliance with the making of public announcement and other formalities under sub regulation (1) of regulation 11 of the Regulations. In the said application, the Acquirer submitted, inter-alia, the following:
(i) The Acquirer along with the persons acting in concert are presently holding 50.50% of total paid-up share capital of the Target company.
(ii) The Acquirer proposes to acquire 49.50% shares of the Target company from the remaining 13 public shareholders at a price of Re 1/- per share payable in cash.
3.0 The Acquirer has sought exemption from making the public announcement and other provisions of Chapter III of the Regulations on the following grounds:
(i) The promoters (Acquirer) are holding 50.50% of the voting capital of the Target company.
(ii) The Target company has a very small public shareholding having 13 shareholders. Therefore, it would be very convenient to complete the procedure and save cost.
(iii) The Target company has not paid dividend and has accumulated losses to the extent of Rs.177lacs as on 31.03.01.
(iv) The shares of the Target company are not traded on the exchange for past several years.
( v) The proposed offer will be made to the shareholders directly through a letter under Registered Post AD .
4.0 The said application was forwarded to the Takeover Panel on September 02 , 2002 in terms of sub-regulation(4) of regulation 4 of the Regulations. The Takeover Panel vide its report dated September 05, 2002 has recommended, inter alia, as under:
"The Acquirer along with the Persons Acting in Concert already hold 50.50% of the paid-up capital of the target company. The Acquirer intends to acquire all the outstanding equity shares of the target company by directly approaching the remaining shareholders. The said offer is not likely to lead to change of control / management of the target company. In the facts stated, 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 individual shareholders and posting such letters by registered acknowledgement due post;
(ii) submitting certificate of auditor / independent Chartered Accountant to the effect that the offer letters were so posted;
(iii) offering the minimum price per share calculated in accordance with the provisions of Regulation 20 of the Takeover Code."
5.0 I have taken into consideration the application dated 29.08.2002, the facts and documents available on record and also the recommendations of Takeover Panel.
5.1 It is observed that the public shareholding is 49.50% of the paid-up capital of the Target company held by 13 shareholders. 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 holding 50.50% 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. I find that the shares of the Target company have not been traded since the last five years and there is no other exit opportunity for the public shareholders. The book value per share is nil as on 31.3.2001. I find that the offer price of Rs.1/- appears to be justified in terms of sub-regulation (3) of regulation 20 of the Regulations.
5.2 I also find that as a result of non trading in the shares of the Target company, there may not be any change in the public shareholding and hence, the process of sending individual letters under registered post A.D. to the public shareholders will be appropriate.
5.3 Taking 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 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 49.5% of the paid-up capital of the Target company in terms of sub-regulation (1) of regulation 11 of the Regulations subject to the following -
(i)that individual letters of offer to each public shareholder of the Target company, offering to buy the shares at the price of Rs.1/- per share shall be sent by the Acquirer by "registered acknowledgement due" post;
(ii)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. The Acquirer shall submit the certificate of Auditor / independent Chartered Accountant to the effect that the letters of offer were so posted;
Date: September 27th, 2002
Place: Mumbai
G.N. BAJPAI
CHAIRMAN