ORDER
G.N. Bajpai, Chairman
1. Reliance Capital Limited (hereinafter referred to as the ‘Acquirer’) proposes to acquire 78,00,000 equity shares constituting 5.66% of the equity capital of BSES Limited (hereinafter referred to as the ‘Target company’) from Reliance Power Ventures Limited (hereinafter referred to as ‘Transferor’).
1.2 The shares of the Target company are listed at The Stock Exchange, Mumbai, The National Stock Exchange of India Limited, The Stock Exchange, Ahmedabad, The Calcutta Stock Exchange Association Ltd., The Delhi Stock Exchange Association Ltd., Bangalore Stock Exchange Ltd., Inter-connected Stock Exchange of India Limited. The GDRs of Target company are listed on London Stock Exchange and FCCBs are listed on Society de la Bourse de Luxembourg.
2. The Acquirer made an application dated 28th February 2003 under sub-regulation (2) of regulation 4 of the SEBI (Substantial Acquisition of Shares and 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 provisions of regulation 11(1) and compliance with the provisions of Chapter III of the Regulations.
3. In the aforesaid application, the Acquirer, inter-alia, submitted the following:
The Acquirer and the Transferor are both group companies of Reliance Industries Limited (RIL).
RIL along with the Transferor and other persons acting in concert holds 44.12% equity capital of the Target company.
The Transferor and Reliance Industrial Investments and Holdings Ltd (RIIHL) are wholly owned subsidiaries of RIL.
RIL is the promoter and holds 47.20% shares/ voting rights in the Acquirer. This has been clearly stated/ disclosed in the prospectus dated 22 December 1994 issued by the Acquirer.
The Transferor & RIL (as Acquirers) along with RIIHL made an open offer for purchase of 3,22,81,460 shares of Target company which was open from January 17, 2003 to February 15, 2003.
In the aforesaid open offer valid applications received against the said offer aggregate to 14.10% of the Target company. As a result, the total shareholding of RIL, Transferor and other persons acting in concert would be 58.22% in Target company, subsequent to the acceptance of shares.
Both the Acquirer and Transferor would constitute ‘group’ companies of RIL within the meaning of Reg. 3(1)(e)(i) and would be reflected as ‘group’ companies of RIL in the Annual report of Target company for the Financial Year ending March 31, 2003.
Had the proposed acquisition taken place after publication of the Annual Report of Target company for year ending March 31, 2003, the said transfer would have been automatically exempt under Regulation 3(1)(e)(i).
Proposed transfer is merely preceding such publication of Annual report of Target company and the proposed transfer will not have any consequence on the aggregate shareholding of the RIL group.
The proposed transfer will not result in change in the management or control of Target company.
4. The said application for exemption dated 28th February, 2003 was forwarded to the Takeover Panel on 28th February, 2003 in terms of sub-regulation(4) of regulation 4 of the Regulations. The Takeover Panel vide its report dated 10th March 2003 has recommended, inter alia, as under:
“On the facts stated in the applications, according to the applicant, RPVL and RCL are group companies within the meaning of Regulation 3(1)(e)(i) of the Takeover Code. On this basis, had the proposed acquisition taken place after the publication of the Annual Report of BSES Limited for the financial year ending 31st March, 2003, the Acquirer would have been entitled to automatic exemption. Subject to Securities And Exchange Board Of India satisfying that RPVL and RCL are group companies within the meaning of Regulation 3(1)(e)(i) of the Takeover Code, grant of exemption as sought is recommended.”
5. I have taken into consideration the application dated 28th February, 2003 the facts and documents available on record and also the recommendations of Takeover Panel.
6. I have noted that RIL is a promoter of the Acquirer and holds 47.20% in the Acquirer company.
7. I have noted that RIIHL, and Transferor are both wholly owned subsidiaries of RIL and in the Annual Report of RIL for the year ended March 31, 2002, both RIIHL and Transferor have been shown as subsidiary companies of RIL.
8. I have noted that the Acquirer, the Transferor, RIIHL and RIL belong to the same group in terms of definition of MRTP Act, 1969.
9. In terms of regulation 3(1)(e)(i), acquisition by virtue of inter-se transfer of shares amongst ‘group’ coming within the definition of group as defined in the Monopolies and Restrictive Trade Practices Act, 1969 are exempt from the provisions of Regulations 10,11 and 12 where persons constituting such group have been shown as group in the last published Annual Report of the target company, subject to compliance with Chapter II by the transferor and the transferee.
10. In the instant case, I find that although the Acquirer and Transferor have not been shown as a group in the Annual Report of Target Company for the FY 2001-2002, they are part of the same group in terms of the MRTP Act, 1969.
11. I have also observed that RIL, the Transferor along with RIIHL made an open offer for acquisition of 32,281,460 equity shares representing 23.44% of the total subscribed and paid-up equity share capital (20% of the voting capital) of the Target company. The said offer closed on February 15, 2003. From the information available with SEBI regarding the said offer, it is observed that pursuant to the said offer, RIL along with the transferor, RIIHL and other body corporates holds 58.22% of the total subscribed and paid-up equity share capital (49.67% of total voting capital) of the Target company. I have noted that the Acquirer is not holding any shares in the Target company and proposes to acquire shares of the Target company from the Transferor pursuant to which the shareholding of the Acquirer in the Target company would increase to 5.66%, while the shareholding of RIL group would not change.
12. I also find that as a result of the proposed acquisition there will be no change in control of the Target company.
In view of the above, I find that in the facts of the case, the grant of exemption would not be detrimental to the interests of the shareholders of the Target company.
Taking into consideration the above, the recommendations of the Takeover Panel, 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 for the proposed acquisition of 78,00,000 equity shares constituting 5.66% of the equity capital of the Target company from complying with the provisions of Chapter III of the Regulations.
The Acquirer is also directed that proposed acquisition of 78,00,000 equity shares constituting 5.66% of the equity capital of the Target company be completed within 30 days from the date of passing of this Order and a report under regulation 3(4) on the same be filed by the Acquirers with SEBI.
