THE BYPASS ROUTE TO SEBI TAKEOVER CODE GAINS POPULARITY

Orchid chemicals – a company with a market cap of about 1500 Crs. (as on close of business on 15th December 2009) was taken over for $400 Million Roughly Rs. 1860 crs.) yet no Open offer is triggered.

Incidentally this is not first such case. Orchid management has just followed other such deals. Notable amongst them is Eicher Mootrs (December 2007 deal valued at USD 350 Million) and Gwalior Chemicals (June 2009, Deal valued at Euro 82.4 Million) Such deals valued at hundreds of crores were all able to BYPASS the SEBI Takeover Rules which were promulgated to protect the interest of small shareholders.

Some small shareholder who keep an eagle’s eye on such M & A activities designed by the corporates to short change the small shareholders, did complain to SEBI but it seems that no action has been taken by SEBI resulting in encouraging more and more management to resort to such BY PASS.
Lets examine what the SEBI Takeover code says :
SEBI TAKE OVER CODE REG 12 STATES:
Acquisition of control over a company
12. Irrespective of whether or not there has been any acquisition of shares or voting rights in a company, no acquirer shall acquire control over the target company, unless such person makes a public announcement to acquire shares and acquires such shares in accordance with the Regulations.

It defies any logic in all such cases. Just examine Orchid case


1. A company with a market cap of Rs.1500 Crs. Is being taken over at more than its Market cap –Rs.1860 Crs. and it does not amount to TAKEOVER?
2. If 15% of the shares were bought of the same co.—amounting to Rs. 225 Crs. –it will be take over.
3. Regulation 12 says Acquisition of control over a company—how then acquisition of control over substantial parts or whole of the company’s assets is not “ Acquisition of control” ?
4. A basic question that comes up is what is a Company? Is the BOARD ROOM a company? Or the place where the real business is done, is the company ? Sale of the business earning in hundreds of crores with about 450 employees at a price of Rs. 1860 crs. Is not a sale/ transfer of control over the company?

SEBI needs to wake up to such deals and Block the By-pass by taking immediate & firm action and directing the parties concerned to follow the Takeover code in letter and spirit. If this loophole is not plugged, soon we will have many dud or KHOKA companies listed on our exchanges.

Why would a Mylan takeover a company like Matrix and come out with an Open Offer & later delisting offer? When an easy escape route is available in the present format with SEBI not making any effort to block the BY PASS, it will be foolish not to exploit it. By buying just the assets the Acquirers takes care of 2 steps at one go—avoids making an Open offer and also subsequent delisting exercise

GREAT OFFSHORE

http://www.youtube.com/watch?v=2TDGoYErCTk
http://profit.ndtv.com/2009/12/05002531/Sebi-summons-ABG-Shipyard.html

4 December 2009
Ref. Open Offer of Great Offshore Limited by ABG Shipyard Ltd.
Sub: Recent sale of shares of Great Offshore by ABG

It was quite shocking to learn from the press that ABG Shipyard has sold its entire holding in Great Offshore on 2nd December, 2009. This is highly objectionable. Some of the grounds are as follows:

1)As per regulation 25(3) of Regulations, the competitive bidder has to make an offer for as many shares as would make his total holding equal to the holding of the first bidder after taking into account the shares already held by them together with shares proposed to be acquired in the Open offer. Based on ABG’s holding of 7.89 lacs their Open offer for 125.71 lacs shares was cleared.
Para 3 of the Letter of Offer (LOO) states as follows:

“This Offer is a competitive bid. Therefore, in compliance with regulation 25(3) of Regulations, the
Acquirer proposes to acquire 1,25,71,072 Shares of the Target Company (32.12% of Diluted
Share Capital of the Target Company and 33.85% of current share capital of the Target
Company), being together with Shares already held by the Acquirer and the PAC at least equal to
the holding of the First Bidder including the number of Shares for which the offer has been made
by the First Bidder, as of the date of the PA. The Acquirer proposes to acquire the Shares validly
tendered in accordance with the terms of the Offer at Rs.520 for each Share of the Target
Company, to be paid in cash in accordance with the Regulations in accordance with the schedule
of activities contained herein. As on the date of the PA, the Acquirer and the PAC collectively held
7,89,502 Shares of the Target Company (2.02% of the Diluted Share Capital of the Target
Company). Since the date of the PA, the PAC has further purchased 22,89,069 Shares through
open market purchases in compliance with the Regulations. Therefore, as of the date of this
Letter of Offer, the Acquirer and the PAC collectively hold 30,78,571 Shares of the Target
Company (7.87% of the Diluted Share Capital). The Offer is subject to the receipt of certain
approvals as set forth below in the section “Statutory Approvals and Other Approvals required for
the Offer”. The Acquirer will acquire all the Shares that are validly tendered in accordance with
the terms of the Offer. The maximum consideration payable under the Offer is Rs.653,69,57,440/-
(Rupees Six Hundred and Fifty Three Crores Sixty Nine Lacs Fifty Seven Thousand Four Hundred and Forty Only) ("Maximum Consideration").

Therefore the condition based on which the size of the Open offer was determined cannot be belied. After having announced the Open offer determining the size of the offer based on its holding, they cannot be allowed to sell their holding. Even if their Open offer were to be fully subscribed, their holding will not be equal to the first bidder’s initial holding i.e. 1,33,60,574 as mentioned in the LOO para 2.

2) The size of the open offer for 125.71 lacs shares itself is incorrect because as on the date of the letter of the offer, Bharati was holding 8.65 lacs shares and after the offer the holding will go upto 164.76 lacs shares therefore the offer should have been for equivalent quantity of shares. ABG should be asked to revise the offer size to 164.76 lacs shares. Even before selling the shares ABG’s total holding would have been a maximum of 156.49 lacs (page 28 of LOO), i.e. less than the stipulated no. of 164.76 lacs shares.

3) During the Offer period selling the shares of the Target company by the Acquirer is contrary to public stance of The Acquirer. SEBI in the past has come out heavily against persons who recommend buying particular shares and contrary to their recommendation were selling the shares. Rightfully, such market manipulations cannot be allowed. On one hand. ABG is creating artificial demand of the shares by announcing public offer and on the other hand taking advantage of such artificial demand and increase in prices, sells the shares.

4) Takeover Regulations provide the basis of Offer price. It should be higher or the price determined under various formulas. The basic idea is to reward the small shareholders adequately, albeit for a small portion of the capital of the co. Regulation 20(7) states that – in case acquirer buys shares after the date of PA at a price higher than the offer price than highest price paid shall be payable under offer. Similarly the highest price at which the shares has been sold by acquirer should be the offer price, since that is the price established because of the unique position of the acquirer.

5) Such sale is also illegal under insider trading regulations since the seller had the inside knowledge which was not available in the public domain that they are not serious about the open offer. The heavy price fluctuation on 2nd December is a proof of such an adverse impact. The price of Great Offshore plunged to 506 from a high of Rs. 580. ABG illegally made huge profit at the cost of small shareholders.

6) The LOO has taken yet another liberty with the Law. It has changed the definition of the term “Offer Period”.
Regulation 2 (f) "4[offer period’ means the period between the date of entering into Memorandum of Understanding or the public announcement, as the case may be and the date of completion of offer formalities relating to the offer made under these regulations.];
Page 4 of LOO “Offer Period --20 day period from the date of the opening of the Offer on December 3, 2009 to the closing of the Offer on December 22, 2009 (both days inclusive)
Definition of terms legally defined cannot be changed arbitrarily?
7) The wisdom & motive of large brokerage houses who are trustees of public money, is suspect in buying such shares from one of the Competitive bidders. The trigger for price rise in the shares of Great Offshore was clearly the Competitive bid by ABG. The moment ABG was out of the race, the prices crashed from 580 to 506.
In the light of the above I strongly urge you to please investigate and take necessary actions as follows:
a) Ask ABG to revise the offer price to the highest price at which it has sold the shares.
b) Ask ABG to revise the offer size to 164.76 lacs shares.
c) Initiate enquiry against ABG for trying to mislead SEBI by declaring that it was holding a certain no. of shares and was thus obliged to come out for an offer for lesser no. of shares and not holding such shares.
d) Initiate enquiry against ABG Under Insider trading laws for illegally making profit from information not already in public domain—their intention not to proceed seriously with their Open offer.
e) The role of the Merchant Banker in allowing such an action by the Acquirer.

Suggested amendment- SEBI Take over code

1.
Objective
It should be a stated objective that small shareholders must be treated at par in all respect at least to the extent of Open offer.
The Acquirer & Seller at times enter into some innovative agreement. The benefit of such agreements is denied to small share holders. In the case of Takeover of Mount Everest Mineral Water Ltd. by Tata Tea Ltd. The Sellers were given Put Options but the same benefit was not extended to minority shareholders.
2.
Definition of Control
The definition should be made broad based and include a physical control/takeover/purchase of substantial undertaking of the company. It should be made clear that
Recently there has been a case of Takeover of Gwalior Chemicals Ltd. This was designed as per the earlier case of Eicher Motors Ltd.
The entire manufacturing facility-plants & machineries together with 400 odd employees was sold without making an open offer.
A company with a market cap of Rs.266 Crs.—Gwalior Chemicals, Is being taken over at double the amount –Rs.536 Crs. and it does not amount to TAKEOVER?
1. If 15% of the shares were bought of the same co.—amounting to Rs. 40 Crs. –it will be take over.
2. Why would Mylan etc takeover cos like Matrix and come out with an Open Offer & later delisting offer? When an escape route is available in the present format it will be foolish not to exploit it.
3. By buying just the assets the Acquirers takes care of 2 steps at one go—avoids making an Open offer and also subsequent delisting exercise
4. If this loophole is not plucked soon we will have many dud or KHOKA companies listed on our exchanges.
3.
Definition of Company
A company should be defined inter-alia to include the manufacturing facilities-factories, workshop, offices, research laboratories etc. owned or operated either directly or through a subsidiary.
Regulation 2(b) while defining “Acquirer” states … ‘any person who, …. acquires or agrees to acquire control over the target company.’ but in the absence of such a definition, company is assigned a very narrow definition of a Board Room. People with vested interest argue that if the acquirer has not acquired control over the Board of Directors, he has not acquired control although functionally he may have acquired the control over the entire company—its factory and entire work force, as in the case of Gwalior Chemicals.

4.
Definition of "person acting in concert"(PAC)
It should be expressedly provided that there are 2 contra parties in any deal – a seller & a buyer. They cannot become PAC of each other simillary PAC of Seller/ buyer cannot become PAC of the opposite party.
In the Open Offer of Tata Teleservices (Maharashtra) Ltd.
Tata Sons Ltd. (TSL) was named as PAC (person acting in concert) with the acquirer NTT DOCOMO INC although TSL was a seller.
5.
Definition of “Public Announcement”
Public Announcement should be defined to include any announcement made as per these regulations or any information released in any form to the Public regarding the change in ownership/management/control of the company
In the recent case of takeover of DISA, investors/SEBI lost a justified case in the absence of this definition.
6.
Regulation 7(1A) explanation-- Financial Institution
Either define “ Financial Institution” or replace it with “Public Financial Institution”
At other places instead of financial institution the term used is ‘public financial institution’which has been defined u/r 2 (i). But financial institution has not been defined. As per the RBI act even NBFCs are termed “financial institution”. Would this mean that NBFCs are exempt?
7.
Reg 11(1)
Suitably change Reg 11(1) which reads “No acquirer who, together with persons acting in concert withhim, has acquired, in accordance with the provisions of law, 38*[15per cent or more but less than 38afiftyfive per cent.(55%) ] of the shares or voting rights in a company, shallacquire, either by himself or through or with persons acting in concertwith him, additional shares or voting rights entitling him to exercisemore than 39*[40[5%]]of the voting rights, 41[inany financial year ending on 31st March], unless such acquirer makes a public announcement to acquire shares in accordance with the Regulations.”

A plain reading of the Regulation 11(1) means that in case the holding is say 54.9% than the person can acquire another 5% but if it is already 55% then he cannot buy any further shares.
8.
Reg 11(2) & 11(2A)
These 2 provisions should be merged
The way it stands today, a disciplined person stands at a disadvantage. There is very little difference between 11(2) & 11(2A) the use of the word ‘desirous’ seems to be the key. meaning 11(2) is triggered on acquiring shares in excess of limits whereas 11(2A) is planned.
It is beneficial to trigger rather than plan an open offer u/r 11(2A) because u/r 11(2A) is more stringent and the acquirer will not be allowed to acquire share during the offer period
9.
Reg 14(4)
Time allowed of 3 months after consummation should be changed to 4 working days
3 months time allowed here as against 4 days in Reg 14 (1) is absolutely unjustified. As it is the Acquirer has already got a lot of time till consummation why give him another 3 months?
10.
Reg 16
Specify that a separate PA will need to be issued for each target company
In case of takeover of Dunlop & Falcon one common pA was issued creating a lot of confusion in reading and understanding the information. A shareholder of One co. should not be forced to read information of another co. unrelated to him.
11.
Reg 17
Add the word UNRELATED as below:
The public announcement of the offer or any other advertisement,circular, brochure, publicity material or letter of offer issued in relation to the acquisition of shares shall not contain any misleading or unrelated information.

Same as above
12.
Reg 18
A) Add a rider by inserting sub clauses that it will be construed that the Acquirer has failed to comply with the provisions of Reg. 14 --
(i) in case Letter of Offer is not submitted within the specified time, or
(ii) the document submitted do not carry correct/complete and adequate information,
B) It should be made mandatory to include & publish in the Letter of Offer the observations received by SEBI & the Merchant Bankers against the provisions contained in the PA
C) change in shareholding /trades done beyond a specified limit—say Rs.5 lacs, during the last 6 months should be given
D) Clarify if the names of the persons appearing as part of the promoter group are entitled to and intend to participate in the Open offer or not
A) It has been observed that the Merchant Bankers / Acquirers submit incomplete & inadequate details/documents resulting in long time taken by SEBI in clearing the same. Since they had come out with a PA, in token compliance of Reg.14 they are able to avoid interest & penality.
B) At times investors/ market observers / investor protection organizations make some very valid observations. It is advisable for such an observation and to be made public .
C) Insider trading is a big menace. It has been observed that in almost all cases of Open offer, 2 weeks price average price is substantially higher than the 6 months price. This is certainly a pointer towards Insider trading. A disclosure on the suggested lines will discourage people from indulging in insider trading.
D) In case of Bayer Diagnostic, Zandu etc. one party although a part of the promoter group may not be party to the agreement. Since they hold a major chunk of share capital their position needs to be to enable the small shareholders to take a well informed decision.
13.
Reg 20 (8)
Payment of Non-compete fees should be deleted
This provision has been much abused. This has been used as a tool to pay a differential & lower price to small shareholders. Extra payments have been made to promoters under the garb of Non- compete fees only to deny the same to the other shareholders. In case of Mysore Cement, Mount Everest Mineral water etc. very inefficiently run cos. With no expertise assignable to the promoters extra payment was made in the garb of Non compete fees. In case of Spice Telecom which is under a licensed regime, there is no question of any competition, yet non compete fees was paid. My observation sent in the case of Mount Everest Mineral water is quite relevant here and are reproduced below:
Payment of non-compete fees

a) Why the mighty House of TATAs are scared of competition from The Sellers of a company whose performance has been very dismal and disappointing in its whole of more than 15 years of existence. For the year ended 31st March 2006 it could achieve net sales of only Rs. 16.38 crores and an EPS of Rs. 0.38.

b) The non-compete fees is payable to persons not because they are having any particular expertise but because of their selling the shares that they own. Clause 6C of the PA states “the acquirer has agreed to pay to the seller non compete fees of RS. 30 million”.

c) Since the basis of payment of Non-compete fees is based on the ownership of shares, it does not necessarily mean the capability of the person to compete. Such ownership may rest even with artificial persons or minors.


d) The Managing Director Mr. Salim Govani is not getting any non compete fees, although the so called expertise must be resting with him


e) The sellers will continue to be part of promoters with right to appoint 2 Directors on the board and 50% of their current share holding intact even after the takeover, as such they are obliged to work for the betterment of the company and not compete with it.

f) The Corporate Governance should take care of any conflict of interest that the Directors and /or Promoters may have with the company. Any consideration paid to ensure their good conduct may amount to bribery and corruption.

g) There are further general arguments against the payment of Non- Compete fees:

I. In case of takeover, be it hostile or friendly, there is no need or justification for the payment of such a fees.
II. if the takeover is hostile –where is the need to honour a loser?
III. in case of a friendly takeover, it can clearly be a part of the agreement since the seller might not be interested in the business for one reason or the other.
IV. The amount being paid as “non Compete fees” is paid for the concern and not for the individual. As a co owner, why should the small shareholders be denied the benefit?
V. When the acquirer is acquiring the concern, where is the need for paying such a fee?
VI. The expertise that the seller is supposed to have acquired is during the tenure of serving the company as an ED or MD for which a very rich reward is paid to them.
VII. If the individual expertise is so great it can be retained by the new acquirer for future use, on a more attractive salary
VIII. It is a NATIONAL WASTE to debar such a great expertise from being used for the greater good of the nation.

14.
Reg 44(i)
A) Payment of interest should be made mandatory in all cases where the payment is made after more than 3 months regardless of the fact whether PA was issued in time or not.
B) Rate of interest shall be PLR of State Bank Of India—in case of delay over a prolonged period during which the PLR has changed more than once- the highest rate during the period shall be applicable.
C) In case of delay beyond a Year such rate should be made cumulative.
D) There cannot be any adjustment for any dividends etc. paid by the co.
A) There have been many cases the Acquirers have after issuing PA, delayed the final Offer by one means or the other.
B) Since the Acquirers are Business houses who are likely to borrow at a rate of PLR.
C) It is only logical that in case of long delay, the rate is made cumulative.
D) (i) Dividends are paid by the co. whereas the obligation for payment of interest is that of the Acquirer. (ii) It curbs the liberty of the shareholders to liquidate his holding without losing out on interest. (iii) For more points on this kindly refer to Annexure—my letter February 25, 2003 written in the context of Colour Chem.








ANNEXURE :

Pc_1\D\my doc wiprodata\AG.doc February 25, 2003


To,
Shri G.N. Bajpai,
Chairman
Securities And Exchange Board Of India
Mittal Court, ‘B’ Wing,
1st Floor,
Nariman Point,
Mumbai– 400 021

Dear Sir,

Reg.:- SAT Order ---Clariant on Colour Chem open offer

I am aghast and greatly aggrieved as an investor in Colour Chem Ltd. by the above order of SAT. I request you to Kindly note the following points and make suitable Appeal :

1) The Hon’ble Presiding Officer Grossly failed to appreciate the basic tenets of Stock exchange. All the shares are at par—pari-passu and whoever buys the share at any point of time does so with all the right and obligation of his predecessor shareholder. A common example which will make this point very clear is the case of dividend payment. A person may be holding the share for the whole year, lets say from 1st April to 31st March but when he sells the share even after the year end the purchaser gets the dividend. Such purchaser may have held the share only for a couple of days as against the whole year by the seller. Although the profit that is being sought to be distributed was earned during the period when the seller was the shareholder and was rightfully entitled to such dividend. This is because the buyer steps into the shoes of the seller immediately on his purchase with all the rights and obligation attached to it. Taking it conversely, if the company has incurred losses in the past, the new incoming shareholder will have to bear the loss of his entire capital in case the company goes into liquidation. No doubt the risks and rewards should go together.

2) The Hon’ble Presiding Officer Grossly failed to understand that the Capital Market is one of the most matured market. All the past and future happenings are fully reflected in the current market price of a share. The price at which the shares are bought gives to the buyer all the rights that the seller had. That is to say all the expectations are completely discounted in the market Every development / event is immediately factored into the prevailing market price. Hence the Investors who bought the shares at high price taking into account the likely Open offer by the Plaintiff and receipt of interest will have to bear an unjustifiable loss. It was observed in the order :
“It is impossible to believe that anyone would have though of such an order and factored in the interest when he purchased shares before the said date. Further the said order was challenged by filing an appeal on 6.12.2002 and in the appeal relief was sought against the direction to pay interest and also on the eligibility of the shareholders entitled to be compensated. Since the matter was under dispute in a litigation no prudent person would factor in such an uncertain factor to the purchase price of the shares.”
But how incorrect is such a view need no proof. The movement of price of the shares of the target co. on Monday 24th February 25, 2003 , the first day of trading when SAT’s such view denying the benefit of interest to those persons who bought the shrares after 22.3.98 was known, the price of the target company—Colour Chem crashed on NSE from Rs.241.45(the previous closing price as on Friday 21.02.03) to Rs.195.15 a fall of about 19% or Rs. 46.30 in one single trading session.

3) However, in case the above point is not found to be acceptable than this would mean that the shareholder who sold shares earlier had to bear the loss i.e. the loss of interest that he would have earned. Justice will than demand that all such shareholders should be found out and paid the interest and duly compensated.

4) The Hon’ble Presiding Officer Grossly failed to appreciate that if the impugned order has to be implemented, the rules of trading in stock exchange will have to be re-written, as there will be two class of shares with different rights attached to them since all the shares being traded will not be pari-passu. the person who has purchased the shares as per the prevailing Stock Exchange/ SEBI guidelines has done so with the knowledge that he is purchasing them with all the rights attached to them, will have to suffer irreparable loss.

5) The Hon’ble Presiding Officer Grossly failed to appreciate that this will be against the laws of natural justice and will be discriminating between (i) shareholder who continue to hold the shares and Tender it in the open offer and who do not tender (ii) between those who continue to hold the shares & tender them and those who have sold them (iii) in the hands of the same shareholder who was continuously holding the share and have tendered them yet part of it was only accepted –(which is the most likely scenario), between the holding which was accepted and will earn interest & part of his holding that will not earn the interest.

6) The Hon’ble Presiding Officer Grossly failed to appreciate that this is a ploy by the Plaintiff to unduly enrich itself at the cost of the share holders. This should never be allowed. By this method Clariant is trying to save its payout on account of interest significantly, since majority of the shareholders would have already sold the shares. List of shareholders is not constant and the same set of shareholders who were the members of the company on the relevant date may not be the persons who have tendered the shares against the Open Offer. As everyone related to the capital market is aware The register of members / shareholders is a dynamic one and keeps on changing everyday. This is the very reason why there is a record date for any material benefit to be given to the shareholders. The Plaintiff may save about 75% of its liability on account of interest payment.

7) In case the plea of all the shareholders who tender their shares should be paid the interest is not found acceptable, the Plaintiff should be asked to pay such interest to the shareholders who were holding shares as on that date regardless of the fact that they have tendered their shares or not. In the alternative they should be asked to deposit this amount in the Investor’s protection fund.

8) This may lead to a new kind of Malpractice of hiring out names/folios. Persons who were shareholders as on 22.3.98 may get a premium for using their name to tender shares in the open offer for third parties.

9) The impunged order restricts the liberty of the investor. The person who is holding the shares continuously from 22.3.98 cannot sell it now without incurring heavy losses because the benefit of interest will be lost and the mechanism of Stock exchange of factoring all such benefits has been derailed. It is common knowledge that small investors put their meager savings in shares for rainy days—unfortunate illness or daughters marriage. But because of the impunged order they will have to postpone the treatment of their illness or marriage etc. till such time as the Plaintiff comes out with an open offer. The small investor will hence forth be completely at the mercy of some scrupulous people who try all kind of tricks to avoid their legal liability and deprive of poor investors

10)The Hon’ble Presiding Officer Grossly failed to appreciate that this will be against the spirit of the legislation which has been admitted in the very recent WIMCO case to be a “ beneficial legislation” .

11) The Hon’ble Presiding Officer Grossly failed to appreciate that the amount of interest payable by the Plaintiff is very large at Rs.250(approx) per share on 23,29,828 no. of shares will come to Rs 5824.57 lacs. . Non payment of approx.75% of this will result in a substantial loss to the Exchequer. The loss of Tax Deducted At Source (TDS) only will be about Rs. 447.75 lacs.

12) If the impugned order is implemented there will be a substantial cash flow loss to the Nation who will be deprived of valuable Foreign Currency.

13)The Hon’ble Presiding Officer Grossly failed to appreciate that it is impractical to enforce it. Shares are fungible commodity and mostly not being maintained in the physical form. It cannot be fully determined who were the shareholders as on that date. The following points will illustrate the matter further:
a) Some persons might be holding the shares in the physical form as on 21st November, 1997 and got them subsequently dematerialsed and tendered it in the electronic form.
b) In some cases transfers would have taken place due to process of law, transmission without there being an actual change in the beneficial interest.
c) Consolidation of family holding when various folios were consolidated. This has actually happened in large nos. after Demat was introduced.
d) In some cases transposition of the names would have taken place resulting in the change of folio numbers.
e) Since shares held in the Demat form do not have any distinctive nos. how it can be determined that the shares tendered against the open offers are the very same shares that were held as on the relevant date. Some Shareholder would have been holding the shares on the relevant date but subsequently sold them and bought again before the tendering date.
f) Shares can be rematerialsed also, but in this case the folio no. will change and will have a current date.
g) How the interest will be calculated in case of someone who was a shareholder as on 21.3.98 but bought additional shares and tendered them against the open offer, part of which were only accepted.
h) In cases where there is a shift in the DP by the investor how it can be determined what was the actual date of holding.
i) How will the Original Shareholder be compensated for loss of interest on those shares which were not accepted because of participation by new shareholders and consequent over-subscription on the Open offer. For example the intention of the impugned order is to allow interest to all those who were holding shares as on March 22, 1998 , but if a such a person holding share tenders it only about 40% of it is likely to be accepted because others will also participate in the offer. Thus he will not be able to earn interest on that part of his holding which has not been accepted.
j) In case of takeover of Investment companies although the beneficial interest would have transferred, yet the new shareholder will be able to get the benefit of interest payment contrary to the directions in the impugned order.
k) Since there was no “Record Date” as on 21.3.98 some investors although holding the shares did not get them transferred in their name, such investors will lose for no fault of theirs.

I earnestly request you to take up these points in the most forceful way if need be up to the Supreme Court since this will have a cascading effect in so many other cases & the very foundation of investment in shares will be destroyed and interest of a very large no. of share holders will suffer with consequent further loss of Public confidence in the Capital market.

I personally offer my services free of cost to SEBI and its advocates in preparing appeal against this impugned order. Kindly feel free to contact me on any of the numbers given above.

Shall be obliged to hear from you at the earliest.

Thanking you,

Yours truly,

Arun Goenka

P.S

One very important suggestion escaped my mind earlier--Kindly make all the OPEN OFFERS appealable at SAT. This can be done by simply making the process of clearance of Offer document as an ORDER.

SAT has often taken a view that it is a forum for redressal of grievances against an order of SEBI and since clearance of an offer document is not an order, it cannot be heard.

Kindly make the process of clearance of an offer document by means of an appealable order by SEBI .

RAMPANT INSIDER TRADING IN ALL TAKEOVER CASES

CA. Arun Goenka
703 Meadows, Sahar Plaza, Andheri-Kurla Road, Andheri (E)
Mumbai 400 059 Phone& Fax 2838 1348
Email:goenkaarun@gmail.com


Lptp/MYDOC/takeover

1 September 2009

To,

Shri C.B. Bhave,
The Chairman
SEBI
SEBI Bhavan, 3rd Floor, B Wing,
Plot No. C-4A, G Block
Bandra Kurla Complex
Mumbai: 400051


Dear Sir,


Ref. Open Offer of CCAP Ltd..

The PA for the above referred Open Offer was announced on 06-Aug-09. As in the past so many cases this again is a glaring example of “INSIDER TRADING” The 26 week average is given in the PA as 19.52 and 2 week average as 43.46. The Open offer price is Rs.80. It is very clear that only some insider who were aware of the ensuing open offer at a high rate of Rs.80 were cornering the shares before the PA was made. This certainly calls for investigation into the trades done before 3 months of the date of the PA.

There is also a very interesting statement in the PA . Clause 1.4 (d) talks about a “written undated” resignation letters of Directors. Such undated documents apart from being undesirable are also illegal.

Shall be obliged to hear from you at the earliest.


Yours truly,

Arun Goenka




CA. Arun Goenka
703 Meadows, Sahar Plaza, Andheri-Kurla Road, Andheri (E)
Mumbai 400 059 Phone& Fax 2838 1348
Email:goenkaarun@gmail.com


Lptp/MYDOC/takeover

2 September 2009

To,

Shri C.B. Bhave,
The Chairman
SEBI
SEBI Bhavan, 3rd Floor, B Wing,
Plot No. C-4A, G Block
Bandra Kurla Complex
Mumbai: 400051


Dear Sir,


Ref. Open Offer of Maytas Infra Ltd..

The PA for the above referred Open Offer announced today Kindly note the following:

1) 1. PA Shows a 26 week average as Rs. 61.50 and 2 week average as Rs. 93.53 i.e. more than 50% higher. The Open offer price is Rs.112.80. As in the past so many cases this again is a glaring example of “INSIDER TRADING” It is very clear that only some insider who were aware of the change in control & management and ensuing open offer at a high rate were cornering the shares before the PA was made. This certainly calls for investigation into the trades done before 3 months of the date of the PA. If the menace of “INSIDER TRADING” has to be stopped, this case must be investigated in detail.
2) The Offer is under Regulation 10 & 12. Regulation 10 will be attracted on the day more than 15% shares/ voting rights came under the control of the Acquirer. It seems that this date is December 24, 2008
3) The price paid @ 112.80 by IL&FS to IFIN should be of no consequence for the Open offer. This is a private transaction between 2 Aquirers/PAC. Why this is mentioned in Clause (30)( I ) is not clear
4) The PA lacks complete details of the background of the transaction-
(a) what are the complete terms of Loan Against Shares agreement.
(b) Did the Acquirer have a Power of Attorney(PoA) from the pledgor ?
(c) The Acquirers must have stepped into the shoes of the Pledgor on default- what is this date
(d) when was pledge invoked?
(e) Details of CLB order especially --‘IL&FS shall foreclose its rights on 22.51% equity shares’. --Clause (10) of PA
(f) How was this possible for IL&FS to have a right on 37.01% shares without attracting Open offer?


Shall be obliged to hear from you at the earliest.


Yours truly,

Arun Goenka


































Lptp/MYDOC/takeover

7 September 2009

To,

Shri C.B. Bhave,
The Chairman
SEBI
SEBI Bhavan, 3rd Floor, B Wing,
Plot No. C-4A, G Block
Bandra Kurla Complex
Mumbai: 400051


Dear Sir,


Ref. Open Offer of Uttam Galva Steels Ltd..

The PA for the above referred Open Offer was announced on 07-Sept.-09. As in the past so many cases this again is a glaring example of “INSIDER TRADING”

The 26 week average is given in the PA as 47.93
and
2 week average as 97.82. i.e. more than double.

The Open offer price is Rs.120. It is very clear that only some insider who were aware of the ensuing open offer at a high rate of Rs.120 were cornering the shares before the PA was made. This certainly calls for investigation into the trades done before 3 months of the date of the PA.


Shall be obliged to hear from you at the earliest.


Yours truly,

Arun Goenka









Lptp/MYDOC/takeover

10 September 2009

To,

Shri Mr. Deb Kumar Sett,
Company Secretary & Compliance Officer,
Sumedha Fiscal Services Ltd.
Kolkata,


Dear Sir,


Ref. Open Offer of CCAP Ltd. Your letter dt. Sept.8, 2009


Your reply to my E-mail dated 01.09.09 is completely out of context and devoid of any material statement on the issues raised. There are 2 simple points:

a) Prima facie it appears that there has been “INSIDER TRADING” . People with advance information seem to have started buying the shares before the information came to public domain. The 26 week average is given in the PA as 19.52 and 2 week average as 43.46. ------Your response—not a word about “INSIDER TRADING”
b) The PA . Clause 1.4 (d) talks about a “written undated” resignation letters of Directors. Such undated documents apart from being undesirable are also illegal. The undated letter means that it can be used to manipulate the fact. If the person has resigned, put a date to it. Or else you will put a past date later on to manipulate the fact to suit your requirement. I am amazed at your audacity.

I simply wanted to bring such facts to the knowledge of persons whose prime responsibility is to stop “INSIDER TRADING” & enforce lawful conduct in the capital market.


Yours truly,

Arun Goenka












Lptp/MYDOC/takeover

15 September 2009

To,

Shri C.B. Bhave,
The Chairman
SEBI
SEBI Bhavan, 3rd Floor, B Wing,
Plot No. C-4A, G Block
Bandra Kurla Complex
Mumbai: 400051


Dear Sir,


Ref. Open Offer of Mathew Easow Research Securities Ltd.

The PA for the above referred Open Offer was announced on 03-Sept.-09. As in the past so many cases this again is a glaring example of “INSIDER TRADING”

The 26 week average is given in the PA as 8.59
and
2 week average as 16.08. i.e. almost double.

The Open offer price is Rs.19. It is very clear that only some insider who were aware of the ensuing open offer at a high rate of Rs.19 were cornering the shares before the PA was made. This certainly calls for investigation into the trades done before 3 months of the date of the PA.

Sir, in case the menace of “INSIDER TRADING” is to be stopped, SEBI must strong action immediately. You have all the prima facie evidences available – significant Jump in prices ahead of major announcement.

Shall be obliged to hear from you at the earliest.


Yours truly,

Arun Goenka

Insider Trading & Price rigging

It has been observed that Open offers have become a favourite ground for market manipulators & insiders. Please note the following specific cases:

1. Open offer of Tata teleservices Maharastra Ltd. (TTML) ---Just prior to the announcement of Open offer the price & volume had gone up substantially giving clear signs of insider trading . Price & volume increased in the last week prior to the offer( page No. 45 OF OFFER DOCUMENT-price increased by 18.46% and volume by 361.87%.). Again on 12th March the price was manipulated to as low as Rs.15.70. Who will sell the shares at 15-16 when he could still tender in the Open offer at 24.70? Probably the price was rigged to encourage more people to tender their shares in the Open offer which was hugely undersubscribed.
2. Open Offer -- OCL Iron And Steel Ltd.---The PA carries the mandatory 26 Weeks & 2 weeks price, Rs. 7.47 & Rs.20.31respectively. The 270% jump in the price of the share just before the announcement of PA raises a question— whether the insiders are taking undue advantage of their privileged information?
3. Open Offer of Great Offshore Ltd.--- Again here the PA discloses 26 weeks average as Rs.257.04 and 2 weeks average as Rs.343.16 i.e. a jump of 33% just before the announcement.

GWALIOR CHEMICAL TAKEOVER

Lptp/mydoc/takeover/sebi

June 9, 2009

To,

Shri C.B. Bhave,
The Chairman
SEBI
SEBI Bhavan, 3rd Floor, B Wing,
Plot No. C-4A, G Blockce
Bandra Kurla Complex
Mumbai: 400051


Dear Sir,

Takeover of Gwalior Chemicals Ltd.

The Indian Corporates are always fast in adopting any smart move successfully executed by others in bypassing the law. Earlier in the case of Eicher motors Ltd. it happened and now the same model has been adopted by Gwalior Chemicals Ltd. Just examine the following:
1. A company with a market cap of Rs.266 Crs.—Gwalior Chemicals, Is being taken over at double the amount –Rs.536 Crs. and it does not amount to TAKEOVER?
2. If 15% of the shares were bought of the same co.—amounting to Rs. 40 Crs. –it will be take over.
3. Why would Mylan etc takeover cos like Matrix and come out with an Open Offer & later delisting offer? When a escape route is available in the present format it will be foolish not to exploit it.
4. By buying just the assets the Acquirers takes care of 2 steps at one go—avoids making an Open offer and also subsequent delisting exercise
5. If this loophole is not plugged soon we will have many dud or KHOKA companies listed on our exchanges.
6. Regulation 12 says Acquisition of control over a company—how then acquisition of control over substantial parts or whole of the company’s assets is not “ Acquisition of control” ?

You are requested to kindly examine the above and issue necessary directives to the acquirer to come out with an Open offer as per the SAST at the earliest.

Yours faithfully,


Arun Goenka