SEBI/WTM/SR/CFD-DCR/11/03/2017. Case: In Re: Proposed Acquisition of Shares and Voting Rights in NIIT Limited Vs. Securities and Exchange Board of India

Case Number:SEBI/WTM/SR/CFD-DCR/11/03/2017
Party Name:In Re: Proposed Acquisition of Shares and Voting Rights in NIIT Limited Vs
Judges:S. Raman, Whole Time Member
Issue:Securitisation And Reconstruction Of Financial Assets And Enforcement Of Security Interest Act, 2002 - Section 19
Judgement Date:March 07, 2017
Court:Securities and Exchange Board of India
 
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Order:

S. Raman, Whole Time Member

Background -

1.1 NIIT Limited ("Target Company") was incorporated under the Companies Act, 1956 ("Companies Act") on December 2, 1981, as a private limited company under the name of Pace Education Private Limited. The name was changed to NIIT Limited in terms of fresh Certificate of Incorporation dated November 16, 1990. The Registered Office of the Target Company is at 8 Balaji Estate, 1st Floor, Guru Ravi Das Marg, Kalkaji, New Delhi-110019. The shares of the Target Company are listed on BSE Limited ("BSE") and the National Stock Exchange of India Limited ("NSE").

1.2 SEBI received an application dated April 27, 2016 ("Application") from Thadani Family Trust (Trustee - Vijay Kumar Thadani) and Pawar Family Trust (Trustee - Rajendra Singh Pawar) (Collectively referred to as the "Proposed Acquirers") seeking exemption from the applicability of Regulation 3(1), Regulation 4 and Regulation 5 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ("Takeover Regulations") in respect of the proposed indirect acquisition and control of the shareholding and voting rights in the Target Company.

1.3 In the aforementioned application, the following was stated -

"i. "Mr. Vijay Kumar Thadani and Mr. Rajendra Singh Pawar are co-founders and Promoters of the Target Company.

ii. Global Consultancy and Investment Private Limited ('Global Consultancy') holds 15.66% shares (2,59,15,838 shares) of the Target Company. Global Consultancy is a wholly owned subsidiary of Global Solutions Private Limited ('Global Solutions'), which in turn is held 50% each by Mr. Vijay Kumar Thadani and Mr. Renuka Vijay Thadani, wife of Mr. Vijay Kumar Thadani.

iii. As a part of family succession planning, it is proposed that Mrs. Renuka Vijay Thadani will transfer her shareholding in Global Solutions i.e. 50% of the share capital of Global Solutions to her husband Mr. Vijay Kumar Thadani. As Global Solutions is a registered NBFC, an application has been filed with the Reserve Bank of India seeking approval for the aforementioned transfer, Mr. Vijay Kumar Thadani and Mrs. Renuka Vijay Thadani form part of the declared Promoter Group of the Target Company and therefore, the aforesaid proposed transfer is exempt under Regulation 10 of the Takeover Regulations.

iv. A family trust named Thadani Family Trust has been set up for the benefit of Mr. Vijay Kumar Thadani, Mrs. Renuka Vijay Thadani and their lineal descendants ('Thadani Family').

v. PIPL Management Consultancy and Investment Private Limited ('PIPL Consultancy') holds 15.33% shares (2,53,66,521 shares) of the Target Company. PIPL Consultancy is a wholly owned subsidiary of Pace Industries Private Limited, which in turn is held 50% each by Mr. Rajendra Singh Pawar and Mrs. Neeti Pawar, wife of Mr. Rajendra Singh Pawar. (They) form part of the declared Promoter Group of the Target Company.

vi. A family trust named Pawar Family Trust has been set up for the benefit of Mr. Rajendra Singh Pawar, Mrs. Neeti Pawar and their lineal descendants ('Pawar Family').

vii. In order to facilitate succession planning and welfare of Thadani Family and Pawar Family, it is now intended that the ownership and control of Global Consultancy and PIPL Consultancy which hold the shares of the Target Company, will be held by the Thadani Family Trust and Pawar Family Trust, respectively.

viii. Accordingly, Thadani Family Trust intends to subscribe to such number of shares of Global Consultancy such that post subscription, Thadani Family Trust would hold majority i.e. 90% or more, of Global Consultancy and thereby, indirectly acquire ownership and control over 2,59,15,838 shares (15.66%) of the Target Company.

ix. Similarly, Pawar Family Trust intends to subscribe to such number of shares of PIPL Consultancy such that post subscription, Pawar Family Trust would hold majority i.e. 90% or more, of PIPL Consultancy and thereby, indirectly acquire ownership and control over 2,53,66,521 shares (15.33%) of the Target Company.

x. Thus, pursuant to the aforementioned subscription of shares of Global Consultancy and PIPL Consultancy, collectively the Acquirers i.e. Thadani Family Trust and Pawar Family Trust, being persons acting in concert shall acquire ownership and control over 5,12,82,359 shares (30.99%) of the Target Company ('Proposed Indire ct Acquisition').

Details of Acquirers -

Acquirer 1 - Thadani Family Trust: A private family trust settled under a deed of settlement dated April 8, 2016, for the benefit of Mr. Vijay Kumar Thadani, Mrs. Renuka Vijay Thadani and their lineal descendants.

Acquirer 2 - Pawar Family Trust: A private family trust settled under a deed of settlement dated April 8, 2016, for the benefit of Mr. Rajendra Singh Pawar, Mrs. Neeti Pawar and their lineal descendants. The settlers, trustees and beneficiaries of the Trust are as follows:

xi. Trust funds would be utilized by the respective family trusts to subscribe to the shares issued by Global Consultancy and PIPL Consultancy.

xii. The Acquirers currently do not own any shares in the Target Company.

xiii. The current Promoter Group holding in the Target Company as on March 31, 2016, is as follows -

xiv. The date of the Initial Public Offer of the Target was 1st February, 1993 and the offer price was ` 50 per equity share (including premium of ` 40 per share.

xv. Following are the Key Management Personnel ('KMPs') of the Target Company as on 31st March, 2016.

xvi. The shares of the Target Company are frequently traded in terms of Regulation 2(j) of the Takeover Regulations, taking the date of this application as the reference date. The opening price of shares of the Target Company was recorded at ` 82.50 and closing price of shares of the Target was recorded at ` 82.45 on BSE as on a date prior to the date of this application i.e. April 26, 2016.

Proposed Acquisition -

xvii. Global Consultancy is a wholly owned subsidiary of Global Solutions Private Limited, which is promoted jointly by Mr. Vijay Kumar Thadani and Mrs. Renuka Vijay Thadani.

xviii. PIPL Consultancy is a wholly owned subsidiary of Pace Industries Private Limited, which is promoted jointly by Mr. Rajendra Singh Pawar and Mrs. Neeti Pawar.

xix. Thadani Family Trust and Pawar Family Trust shall subscribe to shares issued by Global Consultancy and PIPL Consultancy, respectively. Consequent to such subscription, the Acquirers shall acquire indirect ownership and control of 5,12,82,359 shares (30.99% of the paid up share capital) of the Target Company.

Rationale -

xx. The proposed Indirect Acquisition is being undertaken pursuant to an internal family arrangement intended to streamline succession and welfare of the Thadani Family and Pawar Family. It is a non- commercial transaction which will not prejudice the interests of the public shareholders of the Target in any manner. Further, there will be no change in control or management of the Target Company.

Implications of the Proposed Acquisition -

xxi. Pursuant to subscription of shares in Global Consultancy by Thadani Family Trust and PIPL Consultancy by Pawar Family Trust respectively, the Acquirers would indirectly acquire ownership/voting rights over 5,12,82,359 shares (30.99% of share capital) of the Target Company thus triggering Regulation 3(1) and Regulation 4 read with Regulation 5 of the Takeover Regulations. The Acquirers will become a part of the Promoter Group of the Target Company after the proposed indirect acquisition.

xxii. There will be no change in the control or management of the Target Company. Further, there will be no change in the ultimate shareholding of the Promoter Group in the Target Company.

xxiii. Total equity share capital/voting rights of the Target Company before and after the proposed indirect acquisition will remain the same i.e. 16,55,01,233 equity shares.

Details of exemption sought and grounds for seeking exemption -

xxiv.... the Acquirer has sought exemption from making an open offer in...

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