Mumbai, Sep 19 (UNI) Securities and Exchange Board of India whole time Member K.M.Abraham has, in an order, rejected the application of promoters of Tamil nadu-based Kings Chemicals, seeking exemption from sebi regulations to acquire 1.24 million shares from Indian bank Mutual Fund to increase their voting rights from 27.25 per cent to 41.55 per cent.
In an order passed on Wednesday, Dr Abraham also upheld the recommendation of the takeover panel to grant exemption to acquirers from making an open offer.
In an application made in May this year, R B Rajkumar and T R B Rajaa, son of union Minister T R R Balu, sought exemption from applicability of Regulation 11(1) of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997, in respect of their proposed increase in voting rights from 27.25 pc to 41.55 pc pursuant to the proposed acquisition of 12,44,800 equity shares from Indian Bank Mutual Fund.
The promoters had informed SEBI that the acquisition was to clear off the obligation on the part of the promters and that the acquirers did not have sufficient funds to fulfill the obligation of an open offer.
The order said that there would not be any change in the management in the target company, currently under BIFR and even the proposed acquisition, which was not on the basis of any revival package. The acquisition was solely on the basis of the agreement entered between one of the promoters, the father of the acquirers of the target company and the Indian Bank Mutual Fund in 1992. In terms of the said agreement the promoter had undertaken to buy back 12,50,000 equity shares of the company on the expiry of three years from the date of the said agreement at par or at market rates whichever was higher.
As per the application filed by the acquirers, there were 31,000 public shareholders in the company and that the shares were not being traded in the stock exchanges. The objective of the public announcement as contemplated in the Takeover regulations was to provide the shareholders of the target company an exit opportunity, in case an acquirer acquires subtantial stake in the target company or its control.
The order said if the acquirers were exempted from complying with the provisions of the takeover regulations in respect of their proposed acquisition a large number of public shareholders of the company would be denied an opportunity as provided under the provisions of the Takeover Regulations.
The Order said that that with the public shareholders having 58.45 per cent of stake in teh company, granting exemption would not be in their interest and if an open offer was made it would benefit all of them as they would get an exit opportunity, especially when the shares of the company were not traded on the stock exchanges. The contention that the acquirers did not have sufficient funds to make an open offer by itself was not sufficient enough to grant exemption from complying with the provisions of the Takeover Regulations. Further, the proposed acquisition ws not pursuant to any of the same made or passed by BIFR. Dr Abraham said in the order.
UNI VK OBB SKB1915