Why Rattan India Infrastructure could potentially double from CMP of Rs 3.2 just on basis on Outcome of SAT regarding the open offer -Risk limited to Rs 3.2 (original open offer price)
Let me put a strong Disclaimer that this is neither a Recommendation and please study before making any investment decision. This note is written primarily to share developments which are shared neither by SEBI nor the Company.
One must appreciate SEBI for pulling up one of India's influential promoters to abide by the law. SEBI has issued observations and going by SEBI's Takeover Rules it looks in all likelihood that they would have to issue a premium of close to 100% to existing open offer.
The SAT meeting which was scheduled for 1st July 2016 had been pushed to to 29th July and further deffered to 25th August. Meeting to be held today 30th September 2016.
In October 2015 promoter crossed the 5% threshold and announced open offer to acquire 26% stake at Rs 3.2 and SEBI pulled them up for prior transfers all pointing towards not being eligible under regulation 10(1)(a)(ii). I am not privy to the observations issued on 5th May as it's not yet available as a public document but am extrapolating the data. The same was appealed at SAT and a hearings have been deffered twice
Before the Final observations were issued – the Comment section read - Being examined with respect to prior inter se transfers amongst promoters(one can check that on SEBI'S website for pending Issues February)
FINAL OBSERVATIONS ISSUED FOR DRAFT OFFER DOCUMENTS DURING THE FINANCIAL YEAR 2016-17 AS ON May 13, 2016
http://www.sebi.gov.in/cms/seb
Recent SAT Update: September 2016
As per the manager to the offer (Motilal Oswal) SEBI had asked for an extension to the hearing date which was scheduled on 1st July 2016 has since been rescheduled to 29th July and further deffered to 25th August. SEBI had close to 2 months (5th May observation) to respond yet it asked for an extension was a big surprise as SEBI has been clear in several cases relating to Regulation 10(1)(a)(ii).
Meeting to be held today 30th September
Before you read further a bit about the company- Rattan India Infrastructure is a holding company of Rattan India Power holding a stake of 40.13%. There have been issues with the MSEDCL with regard to the Nasik plant from a couple of years. Fresh development indicates trouble for the Amravati plant as well which was generating power at high PLF's from the last 3 quarters. The entire capacity is down for the entire month of July, due to low off take even though Maharashtra government continues to add Renewable energy at 50% premium to existing long term PPA's
But this pertains to the Holding company .Let me come down straight to the Details of this Open offer.
In July 2014 India bulls Promoters Split and the power vertical were acquired by Rajiv Rattan There were inter-promoter trades at Rs 6.3 and at Rs 5.95 on NSE, BSE as well off market trades.
As per SEBI Takeover Code (refer page 22 on SEBI Takeover)
General exemptions- 10 (1)
The following acquisitions shall be exempt from the obligation to make an open offer under regulation 3 and regulation 4 subject to fulfillment of the conditions stipulated therefor,—
(a) acquisition pursuant to inter se transfer of shares amongst qualifying persons, being,—
(i) immediate relatives;
(ii) persons named as promoters in the shareholding pattern filed by the target company in terms of the listing agreement or these regulations for not less than three years prior to the proposed acquisition;
(iii) a company, its subsidiaries, its holding company, other subsidiaries of such holding company, persons holding not less than fifty per cent of the equity shares of such company, other companies in which such persons hold not less than fifty per cent of the equity shares, and their subsidiaries subject to control over such qualifying persons being exclusively held by the same persons;
(iv) persons acting in concert for not less than three years prior to the proposed acquisition, and disclosed as such pursuant to filings under the listing agreement;
(v) shareholders of a target company who have been persons acting in concert for a period of not less than three years prior to the proposed acquisition and are disclosed as such pursuant to filings under the listing agreement, and any company in which the entire equity share capital is owned by such shareholders in the same proportion as their holdings in the target company without any differential entitlement to exercise voting rights in such company:
OR
Exemptions by the Board. 11.
(1) The Board may for reasons recorded in writing, grant exemption from the obligation to make an open offer for acquiring shares under these regulations subject to such conditions as the Board deems fit to impose in the interests of investors in securities and the securities market.
(2) The Board may for reasons recorded in writing, grant a relaxation from strict compliance with any procedural requirement under Chapter III and Chapter IV subject to such conditions as the Board deems fit to impose in the interests of investors in securities and the securities market on being satisfied that,—
(a) the target company is a company in respect of which the Central Government or State Government or any other regulatory authority has superseded the board of directors of the target company and has appointed new directors under any law for the time being in force, if,— (i) such board of directors has formulated a plan which provides for transparent, open, and competitive process for acquisition of shares or voting rights in, or control over the target company to secure the smooth and continued operation of the target company in the interests of all stakeholders of the target company and such plan does not further the interests of any particular acquirer; (ii) the conditions and requirements of the competitive process are reasonable and fair; Page 31 of 65 (iii) the process adopted by the board of directors of the target company provides for details including the time when the open offer for acquiring shares would be made, completed and the manner in which the change in control would be effected; and
(b) the provisions of Chapter III and Chapter IV are likely to act as impediment to implementation of the plan of the target company and exemption from strict compliance with one or more of such provisions is in public interest, the interests of investors in securities and the securities market.
(3) For seeking exemption under sub-regulation (1), the acquirer shall, and for seeking relaxation under sub-regulation (2) the target company shall file an application with the Board, supported by a duly sworn affidavit, giving details of the proposed acquisition and the grounds on which the exemption has been sought.
(4) The acquirer or the target company, as the case may be, shall along with the application referred to under sub-regulation (3) pay a non-refundable fee of rupees fifty thousand, by way of a banker's cheque or demand draft payable in Mumbai in favour of the Board.
(5) The Board may after affording reasonable opportunity of being heard to the applicant and after considering all the relevant facts and circumstances, pass a reasoned order either granting or rejecting the exemption or relaxation sought as expeditiously as possible: Provided that the Board may constitute a panel of experts to which an application for an exemption under sub-regulation (1) may, if considered necessary, be referred to make recommendations on the application to the Board.
(6) The order passed under sub-regulation (5) shall be hosted by the Board on its official website.
Now where does all this fit in with RattanIndia?
Rattan India Infrastructure listed via a demerger from India bulls Real-estate – Record Date being 8th December 2011. – So even considering Record date - does not comply with the 3 year SEBI Rule for exemption.
http://www.bseindia.com/market
Therefore Promoters were not eligible for exemptions under Regulation 10 (1)(a)(ii) of the Takeover Code and were bound to make an open offer at Rs 6.3.
Considering the delay Open offer should logically include the interest for 2 years.
Now SEBI Has passed several views by Interpretative letters in Cases of Inter -promoter transfer quoting – Regulation 10(1)(a)( ii)
1) Elder Pharma - http://www.sebi.gov.in/cms/seb
2) CEBBCO – Was newly listed IPO – Promoters held shares for more than 3 years but could not comply with the 3 year rule as per 10(1)(a)(ii) as the company was listed only two years prior http://www.sebi.gov.in/cms/seb
3) Nitesh Desai Associates take on CEBBCO - http://www.nishithdesai.com/in
So if Rules as per Regulation 10(1)(a)(ii) are strictly implemented Open Offer should be at either Rs 6.9 or Rs 7.5 (Rs 6.3 trigger price +considering interest for one year or two years as July 2014 to date is 2 years)
I may be biased as I have been holding shares well before the open offer was announced and have kept buying recently as well.
I may be wrong. The above data links to SEBI reports can be analysed before making any investment decision. There always exists a loop hole. I have tried finding it, but not been able to.
The promoter currently owns 62% and considering the size of open offer 26% is bought at his intended price of Rs3.2 – Downside seems Restricted to Rs3.2 – Refer shareholding pattern below. Laurel,Yantra Arbutus belong to Rajiv Rattan group. In a worse case situation it could even go to zero if production does not resume at Amravti so please keep that important issue in mind and SAT Allows deferment on Meetings as the original meet has been postponed over 5 times in last 4 months.
CLETA Builders is an Interesting name which figures in June Shareholding Pattern linked to ex promoter Mr Mittal.
You received this message because you are subscribed to the Google Groups "LONGTERMINVESTORSRESEARCH" group.
To unsubscribe from this group and stop receiving emails from it, send an email to longterminvestorsresearch+unsubscribe@googlegroups.com.
Visit this group at https://groups.google.com/group/longterminvestorsresearch.
For more options, visit https://groups.google.com/d/optout.
No comments:
Post a Comment