SECURITIES AND EXCHANGE BOARD OF INDIA 

ORDER

IN THE MATTER OF PROPOSED ACQUISITION OF SHARES OF ORG INFORMATICS LIMITED - EXEMPTION FROM THE PROVISIONS OF CHAPTER III OF THE SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997

1.0       ORG Informatics Ltd. (hereinafter referred to as “the target company”) proposes to issue 30,66,217 equity shares of Rs. 10/- each representing 27.92% of the enhanced equity capital to Global Asia Partners LP (hereinafter referred to as “the acquirer”).  The acquirer is stated to hold 14.9% of equity shares of the total capital of the target company.  The shares of the target company are listed at Vadodara Stock Exchange, Delhi Stock Exchange, Ahmedabad Stock Exchange and the Stock Exchange Mumbai. As the proposed acquisition will result in the increase of shareholding of the acquirer in the target company from 14.9% to 38.66% the acquirer has filed an application dated January 24, 2004 to the Securities and Exchange Board of India (hereinafter referred to as “SEBI”) seeking exemption from complying with the provisions of Chapter III of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as "the said Regulations").

2.0       In the application, it is submitted that the financial position of the target company is very weak. The networth of the company has been eroded more than 50% during last four financial years preceding the financial year ended on 31.3.2003. The target company is not in a position to repay the loan of USD 65,55,500 taken from  the acquirer and the said loan along with the accrued interest comes to Rs. 3,06,62,170/-. The main objective of allotting shares to the acquirer is to infuse additional capitalization by conversion of loan into equity in order to revive the company. The shareholders of the target company by special resolution of August 30, 2003 gave consent to the acquirer to work as joint controller along with Ambalal Sarabhai Enterprises Ltd. single largest shareholder in the target company.  So the acquirer is already meeting the envisaged criterion under Regulation 12 of the said Regulations. 

3.0       The application was forwarded to the Takeover Panel in terms of Regulation 4 of the said Regulations. The Takeover Panel vide its report dated February 12, 2004 recommended grant of exemption as sought and made the following observation.

“From the facts disclosed, it appears that the financial position of the target company is weak and it is not in a position to repay the loan amount to the Acquirer.  In addition to the amount of loan payable to the Acquirer, the target company owe around Rs. 6,06,67,000 to the Bankers of the Company also against the hypothecation of current assets.

The Acquirer is already working as Joint Controller of the target Company and the conversion of loan alongwith interest payable to the Acquirer into equity would not result into change in control or management of the target Company.  In the facts and circumstances, grant of exemption as sought would be in the interest of the shareholders, employees and creditors of the target company since the objective appears to revive the potential sick company by additional capitalization by converting the loan of the Acquirer.  Subject to the target company passing requisite resolution as per section – 81 (1A) of the Companies Act, 1956 and complying with all procedural formalities in connection therewith, the grant of exemption as sought is recommended.”

4.0       I have taken into consideration the application dated January 24, 2004 the material available on record and the recommendations of the Takeover Panel.

4.1       It is noted that an amount of Rs. 3,06,62,170/- is payable by the target company to the acquirer on account of the loan availed from the acquirer along with the interest accrued thereon.  In respect of the said amount the target company proposes to issue 30,66,217 equity shares to the acquirer by way of conversion of the loan amount.   

4.2       It is noted that the objective for conversion of the said loan amount into equity shares is to revive the target company by additional capitalization. 

4.3       It  is  noted  that  the  acquirer  is  presently  holding  11,79,450  shares   

representing 14.9% of the share capital of the target company and after the proposed allotment the shareholding of the acquirer in the target company would increase to 42,45,667 equity shares representing 38.66% of the share capital of the target company.

4.4       It is noted that the shareholders of the target company by special resolution passed on August 30, 2003 gave consent to the acquirer to work as Joint Controller along with Amabalal Sarabhai Enterprise Ltd., the single largest shareholder in the target company.  Thus it is noted that the acquirer has already come in joint control with the existing promoters and largest shareholder, with the approval of the shareholders of the target company through a special resolution passed on August 30, 2003 by way of postal ballot.             

4.5       It is noted that the proposed acquisition of shares by the acquirers

would not result in change in control over the target company as the acquirer is already exercising joint control over the target company along with largest shareholder pursuant to the special resolution passed by the shareholders on August 30, 2003.

4.6       It is noted that the proposed acquisition would not affect the interests of the public shareholders of the target company.   

5.0      Taking into consideration the above, the recommendations of the Takeover Panel and the larger interest of the 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 said Regulations, hereby grant exemption, to the acquirers from complying with the provisions of Chapter III of the said Regulations with regard to the proposed acquisition of 30,66,217 shares  representing 27.92% of the target company subject to fulfillment of the following conditions :-

a.      A general meeting of shareholders of the target company be called for passing a fresh special Resolution under Section 81(1A) of Companies Act for the said preferential allotment in favour of the acquirers

b.      Following disclosures be made in the explanatory statement under Section 173 of the Companies Act forming a part of the Notice

i.        the price at which the allotment is proposed,

ii.      the identity of such person(s),

iii.     the purpose of and reason for such allotment,

iv.     consequential changes, if any, in the board of directors of the target company and in voting rights, the shareholding pattern of the target company, and

v.        whether such allotment would result in change in control over the target company

c.The guidelines for preferential allotment (including pricing) as prescribed under Chapter XIII of SEBI (Disclosure and Investor Protection) Guidelines, 2000 as amended from time to time be complied with.

d.      Facility of voting through postal ballot for passing of the special resolution as per the procedure laid down for postal ballot under Rule 2A and Rule 5 of Companies (Passing of the Resolution by Postal Ballot) Rules, 2001 be provided to the shareholders of the Target company.  The notice to shareholders of the target company shall include a postage pre-paid envelope for facilitating the consent or dissent.

e.      The acquirers being interested party to the resolution, shall abstain from voting in respect of the resolution.

6.0       The  acquirers  are  also  directed that :-

(i)         the proposed preferential allotment be completed within 3 months from the date of passing of this order and a report under regulation 3(4) on the same shall be filed by  the  acquirers  with SEBI.

(ii)               a certificate of Auditor / independent Chartered Accountant to the effect that all applicable provisions of the Regulations / conditions as stated hereinbefore have been complied with shall also be submitted to the SEBI along with the  report.

7.0       In case of failure of the acquirers to comply with the aforesaid conditions  while making the preferential allotment, the  acquirers shall  be  liable  to   make  open  offer  in  terms  of  the  Regulations, without  prejudice  to  any  other  action SEBI may take in terms of the Regulations and the SEBI Act. 

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