IN THE MATTER OF ACQUISITION OF SHARES OF
SAURASHTRA CEMENT LTD. (SCL)
FITTC DEPARTMENT (TAKEOVERS)

On March 17, 1998, SEBI received a draft of the public announcement of the offer for acquisition of shares of Saurashtra Cement Limited, `the target company’, by Shri Praful M. Patel, Shri Mukesh Patel, Autoriders Industries Ltd. and others, `the acquirers’. The offer was for acquisition of 20% of the issued and paid up capital of SCL, which was stated to be Rs.1199.22 lakhs consisting of 1,19,92,181 fully paid up equity shares of Rs.10/- each, at a price of Rs.75/- per fully paid-up equity shares of Rs.10/- paid up.
 
On March 30, 1998, it was brought to SEBI’s notice that on the date of public announcement the total subscribed equity shares of SCL were 1,99,99,181 in number. It was stated that SCL had made preferential allotments of shares to the promoters and others on three dates viz. March 11, 1998, March 27, 1998 and March 31, 1998 and whereas the public announcement by the acquirer was made on March 19, 1998. 
 
The merchant banker of the acquirers alleged violation of regulation 23(1)(b) and regulation 3(1)(c)(ii) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 and requested SEBI to investigate and to initiate action against the target company and as well as its Board of Directors. 
 
SEBI thereafter issued notice to the target company and the Preferential allottees and heard all the concerned parties in respect of alleged violation of regulation 23(1)(b) and 3(1)(c). 
 
SEBI after hearing came to the following conclusion :

1. The Board of Directors of SCL issued shares on 11/3/1998 in terms of the shareholders resolution dated 31/12/1997 which was prior to the public announcement dated 19/3/1998 and, therefore, not in violation of 23(1)(b).
    

2. That full disclosures of the identity of the allottee(s), the price at which the allotment is proposed, consequential changes, if any, in the shareholding pattern as required under Regulation 3(1)(c)(ii) of the SEBI Takeover Regulations were not made in the AGM notice for the impugned preferential allotment. Besides, to claim the benefit of non-applicability of regulations 10, 11 and 12, the preferential allottees are required to file with SEBI a report within 21 days of the date of acquiring shares on preferential basis which would entitle them to exercise 10% or more of the voting rights of the target company. The five preferential allottees failed to comply with the aforesaid. Therefore, the five preferential allottees are liable to make an open offer under the Takeover Regulations. 

Further, SEBI also found that two of the preferential allottees, namely, F. L. Smidth & Co. of Denmark and Industrialisation fund for Developing Countries of Denmark were not acting in concert with the other preferential allottees and therefore are not liable to abide by the offer obligations under the Takeover Regulations.
 
SEBI has directed the five preferential allottees namely, Fawn Trading Co. Pvt. Ltd., Fern Trading Co. Pvt. Ltd., Tejashree Trading Co. Pvt. Ltd., Willow Trading Co. Pvt. Ltd. and Pallor Trading Co. Pvt. Ltd. to make a public announcement to acquire shares from the remaining shareholders (i.e. other than promoters, their associates and persons acting-in-concert ) of the target company, an aggregate minimum of 20% of voting capital of the target company within a period of two months of its order at a price in accordance with the Regulations.