SEBI grants an exemption to ‘Pantone’ from takeover norms with respect to acquisition of shares in Tata Communications Ltd.

Security and Exchange Board of India (SEBI): S.K. Mohanty, (Whole Time Member) had granted exemptions to Pantone Finvest Ltd., from complying with the requirements of regulation 3(2) read with regulation 10(1)(a)(ii) of the Takeover Regulations 2011 with respect to direct acquisitions in Tata Communications Ltd.

Pantone Finvest Ltd. had proposed acquisition of equity shareholdings of 26.12% in Tata Communications Ltd. as the government had shown its intention to divest its shareholding in the Company partly through the OFS process and partly through sale to a strategic partner i.e., Pantone. Such an increase in shareholding of the Pantone from the current holdings of 48.87% to 58.87% in the Company would trigger an open offer obligation under regulation 3(2) of Takeover Regulations 2011.

The Board noted that both Pantone and government were part of the promoter group of the Company for more than three years in the past thereby, the proposed transaction was eligible for general exemption under regulation 10(1)(a)(ii) of Takeover Regulations 2011. However, it was further noted that the proviso of regulation 10(1)(a) of Takeover Regulations 2011 had mandated that the price should be within the prescribed threshold.

The issue in the instant case was that neither Pantone nor government could determine whether the price arrived at in the OFS process would be in accordance with the proviso of regulation 10(1)(a) of Takeover Regulations 2011. If the discovered price was not within the prescribed range, the transaction would not be eligible for automatic exemption. Therefore, an exemption application had been filed under regulation 11 of Regulations 2011.

The Board observed that the proposed acquisition would make no change in either total equity share capital or total share capital of the Company. Hence, the Board had granted an exemption to Pantone from complying with the requirements of regulation 3(2) read with regulation 10(1)(a)(ii) of the Takeover Regulations 2011 with respect to the proposed direct acquisitions in the Company. However, the exemption was limited to requirements of making an open offer and Pricing Condition and not from disclosure requirements under Chapter V of the Regulations.  [Acquisition of shares and voting rights in Tata Communication Ltd., In Re., WTM/SKM/CFD/5 of 2020-21, decided on 23-02-2021]


Kamini Sharma, Editorial Assistant has put this story together.

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