SECURITIES AND EXCHANGE BOARD OF INDIA 

ORDER

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

                                                                                WTMO/74/CFD/03/04

1.0     Tata Consultancy Services Limited (hereinafter referred to as ‘the acquirer’)

is an unlisted company. The acquirer is a subsidiary of Tata Sons Limited (hereinafter referred to as ‘the transferor’) which holds 90% of the paid-up equity share capital of the acquirer.  

2.0  The acquirer proposes to acquire 77,44,961 equity shares of Rs.10 each constituting 51.12% of the equity capital of CMC Limited (hereinafter referred to as ‘the target company’) from the transferor.   In the year 2001, the transferor acquired 51% of the equity capital of the target company from the Government of India under the PSU Disinvestment Programme following which the transferor assumed management control of the target  company.  Consequently the transferor made the mandatory open offer under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as ‘the said regulations’) and acquired 0.12% from the public shareholders of the target company.  The shares of the target company are listed on The Stock Exchange, Mumbai, the National Stock Exchange of India Limited, Madras Stock Exchange, The Hyderabad Stock Exchange, The Delhi Stock Exchange and The Calcutta Stock Exchange. 

3.0   The acquirer made an application dated March 8, 2004 to the Securities

   and Exchange Board of India   (hereinafter referred to as ‘SEBI’) under sub-regulation (2) of regulation 4 of the said regulations seeking exemption from the applicability of Regulation 10  of the said regulations.

3.1      In the aforesaid application, the acquirer submitted, interalia, the following:

 “ The Company is a subsidiary of Tata Sons (which holds 90% of the paid-up Equity Share Capital), and therefore the proposed acquisition is in the nature of inter se transfer of shares among “group companies”, as defined in the MRTP Act and it would not result in a change of control of the target company. Through inadvertence, it was not specifically disclosed in the last published Annual Report of CMC that Tata Sons and our Company are ‘group companies’. As per the shareholding structure of the Company, both Tata Sons and the Company fall within the same “group” as defined in the MRTP Act, 1969 and Section 370 (1B) of the Companies Act, 1956. The Sale Document recently issued in connection with the Offer for Sale of the shares of CMC to the public also discloses this position.  In the circumstances, we are seeking the specific approval of the Takeover Panel to avail ourselves of the exemption provided in Regulation 3 (1) (e) (i) read with Regulation 3 (1) (l) of the Regulations.“

4.0   The said application was forwarded to the Takeover Panel on March 8, 2004 in terms of sub-regulation (4) of regulation 4 of the Regulations. The Takeover Panel vide its report dated March 11, 2004 has recommended, interalia, as under:

  “Tata Consultancy Services Ltd. is subsidiary of Tata Sons Ltd. CMC Ltd. is also subsidiary of Tata Sons Ltd. The proposed acquisition is in the nature of inter se transfer of shares among ‘group companies as defined in the MRTP Act. It would not result in a change of control of the target company. Hence, grant of exemption as sought is recommended. ”

5.0  I have taken into consideration the application dated March 8, 2004, the material available on record and the recommendations of Takeover Panel.

5.1  It is noted the transferor holds 90% of the equity share capital of the acquirer.

5.2   It is noted that presently the acquirer does not hold any shares in the target company.  As a result of the proposed transfer the acquirer shall acquire 77,44,961 shares representing 51.12% holding in the target company.

5.3   Consequent upon the transfer of the aforesaid shares to the acquirer, there will not be any change in the management and control of the target company.

5.4   I have also noted that in the sale document dated February 13, 2004 issued in connection with the offer for sale of the shares of the target company to the public it has been disclosed that the acquirer and target company are subsidiaries of the transferor.  

5.5  I also note that both the transferor and acquirer fall within the same “group” as defined in the MRTP Act, 1969.

5.6   Taking into consideration the above, 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  Section 19 of the Securities and Exchange Board of India Act, 1992 read with sub-regulation (6) of regulation 4 of the Regulations,  hereby grant exemption,  to the acquirer from complying with `the provisions of Chapter III of the said Regulations with regard to the proposed acquisition of 77,44,961 Equity shares constituting 51.12% of the target company from  Tata Sons Ltd.

6.0  The Acquirers are directed to complete the proposed acquisition within 30 days of the order and file a report under regulation 3 (4) with SEBI. 

6.1  This order shall come into force with immediate effect.

                                                                                                       A.K.BATRA

                                                                                                          MEMBER

                                        SECURITIES AND EXCHANGE BOARD OF INDIA 

Date:  March 29, 2004

Place: Mumbai