SEBI Vs. SAINT GOBAIN GLASS INDIA LTD
LAWS(SB)-2003-1-8
SECURITIES APPELLATE TRIBUNAL
Decided on January 11,2003

Appellant
VERSUS
Respondents

JUDGEMENT

G.N.Bajpai, - (1.) 0 APPLICATION FOR EXEMPTION Saint-Gobain Glass India Ltd. (hereinafter referred to as "the Acquirer") made an application dated 18.11.2002 under sub-regulation (2) of regulation 4 of the SEBI (Substantial Acquisition of Shares & Takeovers) Regulations, 1997 (hereinafter referred to as "the Regulations") to the Securities and Exchange Board of India (hereinafter referred to as "SEBI") seeking exemption from compliance of the provisions of Regulations for making public announcement under sub regulation (2) of Regulation 11 of the Regulations. 1.1 In the said application, it was inter alia stated that :- (i) the Acquirer, is a part of the Saint-Gobain Group, a French multinational having its head quarters at Les Miroirs, France; (ii) the shares of Saint-Gobain Sekruit India Ltd. (hereinafter referred to as the "Target company") are listed at the Mumbai Stock Exchange, Pune Stock Exchange, Delhi Stock Exchange; (iii) the Target company proposes to come out with a rights issue of 2,60,30,200 shares of Rs.10/- each. Currently, 85.77% shares of the Target company are held by Saint-Gobain Group through Saint-Gobain Sekruit France (SGSF); (iv) SGSF is not in a position to subscribe to the rights issue and hence proposes to renounce its right in favour of the Acquirer, belonging to Saint Gobain Group. The Acquirer is one of the key customers of the Target company and hence from a strategic business point of view also it is important for the Acquirer to be a shareholder of the Target company; (v) the financial performance of the Target company is not at all satisfactory and it is likely that the proposed issue will not be subscribed by other shareholders of the Target company; (vi) the Acquirer will take only that much additional portion of the rights issue which is necessary to make the issue successful i.e. 90% of the issue size. The overall shareholding of the Saint Gobain Group will remain less than 90% even if none of the other shareholders subscribe to the issue; (vii) the Acquirer proposes to acquire 2,23,25,410 equity shares of the Target company. The proposed acquisition represents 85.77% of the proposed rights issue. Proposed rights issue size is likely to be 2,60,30,200 equity shares representing 40% of the existing issued capital of the Target company. However, in case of no subscription from the other shareholders, the Acquirer would have to acquire 2, 34, 27, 180 shares representing 90% of the proposed rights issue in order to achieve a minimum subscription of 90% in the issue; (viii) the proposed acquisition of 2,23,25,410 equity shares will be equal to 24.50% of the total equity capital or voting rights of the Target company post-rights issue. In case of no subscription from other shareholders, acquisition of 2,34,27,180 shares would represent 25.71% of the total equity capital or voting rights of the Target company post rights issue; (ix) the rights issue is being proposed by the Target company in view of the insistence by the lenders of the Target company that it shore up its paid up capital. SGSF is not in a position to subscribe to this rights issue and hence proposes to renounce its right in favour of the Indian subsidiary of the Saint Gobain Group i.e. the Acquirer; (x) the control of the Target company already vests with the promoters i.e. the Saint Gobain Group since 85.77% of the equity shares of the Target company are being currently held by SGSF; (xi) as a result of the proposed acquisition of shares by the Acquirer, there will be no change in control of the Target company. The shares proposed to be acquired by the Acquirer would remain with the Saint Gobain Group; (xii) after the rights issue, if the unsubscribe shares are taken up by the Acquirer (to the extent of 90% of the issue) the shareholding of the Saint Gobain Group will remain below 90% (at a level of 89.53%).
(2.) 0 RECOMMENDATIONS OF THE PANEL 2.1 The said application for exemption dated November 18, 2002 was forwarded to the Takeover Panel on December 5, 2002 in terms of sub-regulation(4) of regulation 4 of the Regulations. 2.2 The Takeover Panel vide its report dated December 12, 2002 has recommended, inter alia, as under: "The shares are proposed to be acquired by the Acquirer which is part of the Saint Gobain Group. The shares proposed to be acquired by the Acquirer would remain within the Saint Gobain Group. It appears that as a result of the proposed acquisition of shares by the Acquirer, there is no change in control of the target company. In the facts stated in the application, the Panel is of the view that the privileges of the promoter group should be extended to the acquirer. Grant of exemption as sought is recommended." Onsideration OF APPLICATION & RECOMMENDATIONS 3.1 I have taken into consideration the application dated November 18, 2002, the facts of the case and the documents available on record and also the recommendations of Takeover Panel. 3.2 It is observed that SGSF, a company belonging to the Saint Gobain Group, is the promoter of the Target company and is holding 85.77% of the equity capital of the Target company and is having control over the Target company. 3.3 It is also observed that the Acquirer also belongs to Saint Gobain `Group and SGSF has proposed to renounce its right to subscribe to the equity shares of the Target company in the rights issue in favour of the Acquirer, since SGSF is not in a position to subscribe to the rights issue. 3.4 It is also observed that the Acquirer proposes to acquire the unsubscribe portion of the rights issue so as to ensure the success of the proposed rights issue. Further the Acquirer will take only that much additional portion of the rights issue which is necessary to make the issue successful, i.e., 90% of the issue size. 3.5 It is also observed that the proposed acquisition would not result in any change in control over the Target company since the Acquirer belongs to the promoter group of the Target company, i.e., Saint Gobain Group. Further, if after the rights issue, the unsubscribe shares are taken up by the Acquirer to the extent of 90% of the rights issue, the shareholding of the promoter group, i.e., Saint Gobain Group post - rights issue would remain at 89.53% in the Target company. 3.6 It is also observed that the grant of exemption would not be detrimental to the interest of investors / shareholders of the Target company. The Acquirer has also submitted that the financial performance of the company is not satisfactory and the said rights issue is being proposed by the Target company in view of the insistence by the lenders of the Target company to shore up its paid-up capital.
(3.) 0 ORDER 4.1 Taking into consideration the above, the recommendations of the Takeover Panel and the interest of the public shareholders of the Target company, 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, I hereby , grant exemption to the Acquirer from making public announcement in terms of sub-regulation (2) of regulation 11 of the Regulations and complying with other provisions of Chapter III of the Regulations. 4.2 The Acquirer is further directed to file a Report in terms of Regulation 3(4) read with Regulation 3(5) of the Regulations on completion of the rights issue/ acquisition.;


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