December 29, 1998
PR No. 347/1998

ACQUISITION OF SHARES OF HIKAL CHEMICAL INDUSTRIES LTD. BY MEANS OF PREFERENTIAL ALLOTMENT � SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 1997.

FITTC DEPT.

Hikal Chemical Industries Limited, the company, made a Preferential Allotment of 14,66,700 equity shares to its Promoters and Associates and Sumitomo Corporation, Japan, the acquirers. A report was filed under Regulation 3(4) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 with SEBI. On examination of the report it was observed that the disclosures required under proviso (ii) to Regulation 3(1)(c) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 in the notice calling the shareholders� meetings for passing resolution for preferential allotment were not made. 
 
It was contended by the acquirers that disclosures required under proviso (ii) to Regulation 3(1)(c) of the Takeover Code are necessary only if any of the proposed allottee(s) is/are to be allotted such number of shares as would increase the holding to 5% or more of the post issued capital. It was submitted that the said proviso would not be applicable to the instant case as there was no allottee who held less than five per cent of the shareholding of the Company in the pre-issue stage whose shareholding would increase to five per cent or more in the post-issue stage. It was further submitted that there was no willful attempt to conceal any facts by the Acquirers. 
 
After considering the facts of the case, the documents on record and the submissions advanced on behalf of the acquirers, It was found that the disclosures such as identity of allotees, price, shareholding pattern, consequential changes in voting rights and Board of Directors of the company etc. as required under regulation 3(1)(c)(ii) has not been made and the acquirers were advised to comply with the obligations under Chapter III of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997. Sebi also did not accept the contention of the acquirers that such disclosure need not be made if the acquirer was already holding more than 5% before the preferential allotment. The regulation does not provide that an acquirer who holds above 5%,need not comply with such disclosure. In this regard a harmonious interpretation should be resorted to. 
 
In view of the above the acquirers were directed to make a public offer as required under Regulations.