1.1 Kharikatia Tea and Industries Limited (hereinafter referred to as 'the target company') is a public limited company incorporated under the Companies Act, 1956 and having its registered office at 11/1, Sarat Bose Road, Kolkata - 700 020. The equity shares of the target company are listed on the Calcutta Stock Exchange, Ltd. 1.2 Presently, the shareholding of promoter group in the target company is 99.38% of equity capital in the target company and Shri Jitendra Kr.
Thirani and persons acting in concert with him namely, Luckydhan Vyapar Pvt. Ltd., Hi-Tech Holdings Pvt. Ltd. and Thirani Holdings Pvt. Ltd. (hereinafter referred to as 'the acquirers'), are not holding any shares in the target company. The acquirers propose to acquire 8,27,300 equity shares at a price of Rs. 27/- per share of the target company which amounts to 74.85% of its total paid up capital by way of purchase from the promoter group of the target company, namely, Vanguard Eng.
Ind. Pvt. Ltd. Shri Ashok Kedia, Smt. Suman Kedia, Ballia Textiles Pvt.
Ltd. and Rohit Kedia. Pursuant to the proposed acquisition, the shareholding of the acquirers, in the target company, would increase from nil to 74.85%.
2.1 The acquirers, vide letter dated May 11, 2005 filed an application under regulation 4 of SEBI (Substantial Acquisition of Shares and Takeover) Regulations, 1997 (hereinafter referred to as 'the Takeover Regulations') with SEBI seeking exemption from complying with the provisions of Chapter III of the Takeover Regulations, in respect of the proposed acquisition.
3.1 The acquirers have, in the above mentioned application and by way of further letters dated July 05, 2005 and August 24, 2005, inter alia submitted that:: - i) The tea business of the target company needs further infusion of funds in an efficient manner. The existing promoters intend to transfer their substantial voting rights in favour of the acquirers in order to rehabilitate business of the target company.
ii). For effective and better management of the target company, the acquirers are willing to acquire 74.85% of the existing voting rights from outgoing promoters.
iii). The shareholders of the target company had passed a special resolution in a general meeting of target company held on November 17, 2004, approving transfer of control and management of the target company from the existing persons to the acquirers. On November 18, 2004, similar resolution was passed by the shareholders through postal ballot in terms of the provisions of section 192A of the Companies Act, 1956, approving the transfer of control and management of the target company to the acquirers. In this regard, the resolution was dispatched to all members of the target company by way of post under certificate of posting for voting through postal ballot. However, only six members who belonged to the promoter group in the company controlling above 98% of the voting powers in the target company exercised their voting rights and the special resolution was passed accordingly. Thus, the change in control has taken place in compliance of the proviso to regulation 12 of the Takeover Regulations.
iv). The shares of the target company are infrequently traded on he Calcutta Stock Exchange Ltd. A certificate from Calcutta Stock Exchange in this regard has also been enclosed alongwith the application.
v). The book value per equity share is Rs. 17.78/- as on March 31, 2004. A certificate issued by an Auditor in this regard has also been enclosed.
vi). The acquires agree to pay the negotiated price i.e. Rs. 27/- to the public shareholders also.
vii).The public shareholding in the target company is only 0.62% of the equity capital of the target company and there are only 113 shareholders in the public category, hence, public announcement in respect of the proposed acquisition of 74.85% will not serve any purpose.
4.1 The aforesaid application dated May 11, 2005 and the letters from the acquirers were forwarded to the Takeover Panel, in terms of sub-regulation (4) of regulation 4 of the Takeover Regulations. After being satisfied regarding dispatch, of resolution regarding postal ballot to shareholders of the target company, by post Under Certificate of Posting, the Takeover Panel vide its report dated September 23, 2005 recommended as under - On the facts stated in the Application and considering the Reply dated 24th August, 2005 of the Acquirer alongwith PACs to the query raised, the grant of exemption as sought is recommended.
5.1 While the matter was under examination, the acquirers vide letter dated December 16, 2005 submitted that they agree and undertake as follows:- i). That they will make individual offers to each of the 113 public shareholders of the target company directly addressing offer letters to buy equity shares held by each shareholders in the target company at the negotiated price i.e. Rs. 27/-each.
ii). That they will send such letters of offer to each of the public shareholders at their addresses available on record by registered post acknowledgement due.
iii). That they will appoint a SEBI registered Merchant Banker to operate the escrow account in respect of acquisition of equity shares to the extent of 0.62% of the equity shares of the target company held by public and shall on completion of the proposed acquisition, submit a certificate from the SEBI registered Merchant Banker to the effect that offer letters had been sent by them to individual public shareholders by Registered Post Acknowledgement Due and that all other applicable provisions of Takeover Regulations and conditions provided in SEBI order have been complied with.
iv). That in case, the number of shares offered for sale by public shareholder together with proposed acquisition from promoters exceeds 75% of the total equity capital in the target company, they will accept entire offer of shares from public and the proposed acquisition would be reduced to that extent so that total acquisition by them do not exceed 75% of total equity capital.
6.1 I have carefully considered the application, the recommendation of the Takeover Panel, the submissions of the acquirers and the relevant material available on record. As per the above application, the shareholding pattern of the target company, before and after the proposed acquisition is as under: 6.2 I find that the acquirers are already in control of the target company by virtue of the special resolutions passed by the target company and such change in control has taken place under the proviso to regulation 12 of the Takeover Regulations. Therefore, there would not be change in control and management of the target company, pursuant to the proposed acquisition of 74.85% of the equity share capital of the company by the acquirer. However, as the acquirers are not holding any shares of the target company at present and pursuant to the proposed acquisition their shareholding in the target company would increase from 0% to 74.85% of the equity share capital of the target company the proposed transaction would attract regulation 10 of the Takeover Regulations unless exempted under regulation 3 thereof.
6.3 On a perusal of the application, it is observed that the proposed acquisition is for the purpose of effective and efficient management and better control of the target company and for the purpose of rehabilitation of the business of the target company by infusing fresh funds as and when required. I observe that in respect of the proposed acquisition of 74.85% equity shares in the target company, the acquirers are prepared to make an offer to public shareholders and they seek exemption only from the requirement of issuing the public announcement as required under regulation 10 read with regulations 14, 15 and 16 of Takeover Regulations and from submission of the draft letter of offer to SEBI under regulation 18 of the Takeover Regulations.
6.4 I find merit in the submission that no purpose will be served by public announcement for acquiring shares from the public shareholders of the target company since there are only 113 shareholders in public category and their shareholding in the target company is only 0.62% of the equity share capital of the target company and since the acquirers have undertaken to dispatch individual offer to each shareholder in the public category by registered post acknowledgment due. Further, there are no chances of competitive bidding as the acquirers had already acquired control over the target company through special resolution providing the facility of postal ballot in terms of section 192A of the Companies Act, 1956. Considering the facts and circumstances of the present case, I find the proposed acquisition fit for exemption from requirement of making a public announcement as required under regulation 10 read with regulations 14,15 and 16 of the Takeover Regulations and submission of the draft letter of offer to SEBI as required under regulation 18 of Takeover Regulations, subject to following conditions:- i). The acquirers shall make individual offers to each of the public shareholders of the target company by directly addressing offer letters offering to buy the shares held by such shareholders in the target company at the price to be determined in accordance with the provisions of regulation 20(4) and regulation 20(5) of the Takeover Regulations or the negotiated price of Rs. 27/- per share, whichever is higher; ii). The acquirers shall send such letters of offer to each of the public shareholders at the addresses available on record by registered post acknowledgement due; iii). The acquirers shall appoint a SEBI registered Merchant Banker to operate the escrow account and shall on completion of the proposed acquisition, submit a certificate to the effect that offer letters had been sent by acquirers to individual public shareholders by registered post acknowledgment due and that all applicable provisions of Takeover Regulations and conditions provided in this order have been complied with; iv). The acquirers shall ensure compliance with regulation 21(2) of the Takeover Regulations and shall acquire only such number of shares from the said promoters so as to maintain the minimum level of public shareholding in the target company for the purpose of listing on continuous basis as specified in the Listing Agreement.
7.1 In view of the above findings , I , in exercise of the powers conferred upon me by virtue of section 19 of the Securities and Exchange Board of India Act, 1992 read with sub - regulation (6) of regulation 4 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, hereby grant exemption to the acquirers, Shri Jitendra Kumar Thirani, alongwith persons acting in concert with him namely, Luckydhan Vyapar Pvt. Ltd., Hi-Tech Holdings Pvt. Ltd. and Thirani Holdings Pvt. Ltd. from requirement of making a public announcement as required under regulation 10 read with regulations 14,15 and 16 of the Takeover Regulations and submission of the draft letter of offer to SEBI as required under regulation 18 of Takeover Regulations, in respect of the proposed acquisition of 8,27,300 (74.85%) shares of the Khartikatia Tea & Industries Ltd. from Vanguard Eng. Ind. Pvt. Ltd. Shri Ashok Kedia, Smt. Suman Kedia, Ballia Textiles Pvt. Ltd. and Rohit Kedia subject to the conditions provided in para.
6.4 of this order.
7.2 The acquirers shall complete the transaction within 90 days of date of order and shall file a status report alongwith a certificate for merchant banker as mentioned in para. 6.4 (iv).