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What’s hot in takeovers in this month?
| SAT order in the matter of Nirvana Holdings Private Limited |
| Case Details: |
SAT order in the matter of Nirvana Holdings Private Limited |
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| Target Company: |
Heritage Foods (India) Limited |
| Acquirers: |
Nirvana Holdings Private Limited |
| Industry: |
Food Processing |
| Merchant Banker: |
NA |
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 Case Abstract: |
| Target Company: |
Founded in 1992 by Sri Nara Chandra Babu Naidu, the Heritage Group today has four major business divisions’ viz., Dairy, Retail, Agri, and Bakery under its flagship Company Heritage Foods (India) Limited (HFIL). In the year 1994, HFIL went for Public Issue to raise resources, which was oversubscribed 54 times. At present, its shares are listed on BSE and NSE. |
| Acquirers: |
Nirvana Holdings Private Limited (Acquirer/Appellant) is an investment company whose main object is to invest in shares/debentures of other companies. |
| Sellers: |
Franklin Templeton Mutual Fund in India has been set up as a trust by Templeton International Inc. with Franklin Templeton Trustee Services Pvt. Ltd. as the Trustee (Trustee under the Indian Trusts Act, 1882) and Franklin Templeton Asset Management (India) Pvt. Ltd. as the Investment Manager. |
| Triggering event: |
1. This appeal is filed against the order of Whole Time Member to disinvest within a period of two months from the date of the order 1,34,905 shares constituting 1.17 per cent of the equity capital of the Heritage Foods (India) Limited (Target company) acquired in violation of regulation 11(1) of SEBI (SAST) Regulations, 1997 and transfer the profits, if any, arising out of such disinvestment to the Investor Protection Fund(s) of the concerned stock exchanges.
2. Nirvana Holdings Pvt. Ltd. (Appellant) is a private limited company having only two promoters/directors/shareholders namely, Mr. Nara Lokesh and Ms. Nara Bhuvaneshwari (collectively referred to as “Naras”) holding 50% each.
3. The two Naras in their individual capacity are also the promoters of the Target Company and they together hold 33.38% of the voting rights/share capital in the Target Company and the other 15 promoter hold 12.32% of the voting rights in that company. Thus, the total holding of the promoter group in the Target Company comes to 45.70% including that of the two Naras.
4. The appellant company acquired 9,161 shares of the Target Company on November 13, 2008 and another 7,02,260 shares on November 17, 2008 which together constitute 6.17% of the total equity capital of the Target Company. Since the two Naras in their individual capacity are promoters of the Target Company and they are also promoters of the appellant company holding 100 per cent of its share capital, the appellant company automatically becomes a part of the promoter group of the Target Company and thus, the above acquisition of 6.17% being in excess of 5% is in violation of regulation 11(1) of SEBI (SAST) Regulations, 1997 as the appellant had not made any public announcement in respect of the same.
Contention:
The appellant contended that when we acquired the shares of the Target Company, we were not acting in concert with either Mrs. Nara Bhuvaneshwari & Mr. N. Lokesh or the entities/persons constituting the “promoter group” of the Target Company. Our acquisitions of shares of the Target Company were independent of acquisitions/holdings of “promoter group” of the Target Company. Therefore, our shareholding of 6.17% cannot be added to the “promoter groups” shareholding of 45.7% in order to allege that promoter’s shareholding increased from 45.7% to 51.87% in the financial year 2008-2009. The appellant also submitted that we are open to disinvesting the shareholding of 1.17% which is allegedly in excess of 5% permissible creeping acquisition limit available to us for the financial year 2008-09.
SAT Decision:
The Tribunal observed that considering the definition of promoter, the appellant automatically became a part of the promoter group by virtue of the shareholding of the two Naras in the Target Company. The appellant company is a part of the promoter group of the Target Company even without holding a single share.
Further, the two Naras control the appellant company and they are also its directing mind. No investment decision on behalf of the appellant company could be taken without their authority, knowledge, consent and approval. It is thus obvious that when the appellant company which is a body corporate acquired shares of the Target Company, it acted in concert with the two Naras in their individual capacity who are also the promoters of the Target Company and thus, the above acquisition of 6.17% being in excess of 5% allowable creeping acquisition limit is in violation of regulation 11(1) of SEBI (SAST) Regulations, 1997.
Therefore, the appeal is dismissed and the direction issued by the whole time member to divest the 1.17% shares is modified and the appellant is directed to make a public announcement to acquire the shares of the Target Company in accordance with the provisions of the SEBI (SAST) Regulations, 1997. |
| Offer Details: |
The offer is yet to be made by the Acquirer.
However, the acquirer has made an oral prayer that the operation of the direction issued by us be stayed for a period of four weeks to enable the appellant to file an appeal in the Supreme Court that is allowed.
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 Distinguishing Feature: |
The whole time member has directed the appellant to disinvest the 1.17% of the equity share capital of the Target Company which was in excess of the permissible limit of 5% and transfer the profits, if any, to the Investor Protection Fund(s) of the concerned stock exchanges.
However, in the appeal filed to Hon’ble Tribunal, the appellant is directed to make Public Announcement to the shareholders of the Target Company.
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 Comment on this Case: |
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As Per PA 
On Going Offer 
Offer Process with SEBI
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