Exemption order under Regulation 11 of SEBI (SAST) Regulaitons, 2011 in the matter of “Symphony Limited”

WTM/GM/CFD/89/2019–20 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTION 11(1) AND SECTION 11(2)(h) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 READ WITH REGULATION 11(5) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 2011.

IN THE MATTER OF PROPOSED ACQUISITION OF SHARES AND VOTING RIGHTS IN – TARGET COMPANY SYMPHONY LIMITED ACQUIRER(S) RUPA BAKERI FAMILY TRUST ACHAL BAKERI FAMILY TRUST

Background –

1. Symphony Limited (“Target Company”) was incorporated under the Companies Act, 1956 on February 5, 1988. The Registered Office of the Target Company is at Symphony House, Third Floor, FP-12, TP-50, Off S.G. Highway, Bodakdev, Ahmedabad – 380059. The shares of the Target Company are listed on BSE Limited (“BSE”), the National Stock Exchange of India Limited (“NSE”).

2. SEBI received two applications dated June 27, 2019 ("Application") from Achal Anil Bakeri – Trustee of Rupa Bakeri Family Trust ("Acquirer Trust 1") and Achal Bakeri Family Trust ("Acquirer Trust 2") (collectively referred to as the “Acquirer Trusts / Proposed Acquirers”) seeking exemption from the applicability of inter alia Order in the matter of Symphony Limited

Regulations 3, 4 and 5 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ("Takeover Regulations") in the matter of proposed direct and indirect acquisition of interest in the Target Company, by the Acquirer Trusts. Amended Trust Deeds dated December 16, 2019 were also received vide email dated Dec 18, 2019.

3. Regulation 3(1), 4 and Regulation 5(1) of the Takeover Regulations states – “Substantial acquisition of shares or voting rights.

3. (1) No acquirer shall acquire shares or voting rights in a Target Company which taken together with shares or voting rights, if any, held by him and by persons acting in concert with him in such Target Company, entitle them to exercise twenty-five per cent or more of the voting rights in such Target Company unless the acquirer makes a public announcement of an open offer for acquiring shares of such Target Company in accordance with these regulations.

Acquisition of control

4. Irrespective of acquisition or holding of shares or voting rights in a target company, no acquirer shall acquire, directly or indirectly, control over such target company unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with these regulations.

Indirect acquisition of shares or control

5. (1) For the purposes of regulation 3 and regulation 4, acquisition of shares or voting rights in, or control over, any company or other entity, that would enable any person and persons acting in concert with him to exercise or direct the exercise of such percentage of voting rights in, or control over, a target company, the acquisition of which would otherwise attract the obligation to make a public announcement of an open offer for acquiring shares under these regulations, shall be considered as an indirect acquisition of shares or voting rights in, or control over the target company.

4. In the aforementioned Application and subsequent submissions, the following was inter alia stated –

A. As on the date of application, the present shareholding in the Target Company along with the shareholding post the proposed acquisition in the Target Company, are provided below:

Table A – Shareholding in the Target Company (Source: Application) Sr. Name Present Shareholding Proposed Shareholding No. No. of % No. of % shares Shareholding shares Shareholding A. Promoter/ Promoter Group 1. Rupa Bakeri Family - - 3,04,61,10 43.54% Trust (Acquirer 1) 0 2. Achal Bakeri Family 1000 0 82,92,440 11.85% Trust (Acquirer 2) 3. Achal Anil Bakeri HUF 24,00,000 3.43% 1000 0.00% 4. Achal Anil Bakeri 2,92,62,600 41.83% 1000 0.00% 5. Rupa Achal Bakeri 70,93,940 10.14% 2000 0.00%

6. Jonaki Achal Bakeri jointly 1000 0.00% 1000 0.00% with Achal Anil Bakeri 7. Hansa Bakeri jointly with 20000 0.03% 20000 0.03% Achal Anil Bakeri 8. Pavan Bakeri jointly with 12,04,000 1.72% 12,04,000 1.72% Anil Bakeri 9. Sanskrut Tradecom Pvt Ltd 1,24,83,200 17.85% 1,24,83,200 17.85% 10. J onaki Bakeri Family Trust 1000 0.00% 1000 0.00% 11. H irva Bakeri Family Trust 1000 0.00% 1000 0.00% B. Public Shareholding 1,74,89,260 25.00% 1,74,89,260 25.00% C. Total (A + B) 6,99,57,000 100% 6,99,57,000 100%

B. As per the Applications dated June, 27, 2019:

i. Achal Anil Bakeri, is a Promoter who holds 2,92,62,600 (41.83%) equity shares in the Target Company and Rupa Achal Bakeri is a Promoter who holds 70,93,940 (10.14%) equity shares in the Target Company. Achal Anil Bakeri has settled an irrevocable Family Trust, viz. Rupa Bakeri Family Trust, by executing a Trust Deed dated June 15, 2019. Anil Ratilal Bakeri has settled an irrevocable Family Trust, viz, Achal Bakeri Family Trust, by executing a Trust Deed dated November 10, 2016. The Trustees and beneficiaries are the family members of the Transferors.

ii. Sanskrut Tradecom Private limited ("STPL") holds 1,24,83,200 (17.85%) equity shares of the Target Company. Achal Bakeri currently holds 12,500 (3.49%) equity shares and Rupa Bakeri holds 3,45,257 (96.51%) equity shares of STPL. Out of 12,500 shares, 12,499 shares shall be transferred to Rupa Bakeri. Upon transfer Rupa Bakeri would hold 3,57,756 (99.99%) equity shares and Achal Bakeri would left with only one share of STPL.

C. The proposed acquisition of shares by the Acquirer Trusts envisages the following – i. Transfer of 3,04,61,100 (43.54%) equity shares of the Target Company (2,92,61,600 equity shares held by Achal Anil Bakeri and 11,99,500 equity shares that would be received upon the partition of the Achal Bakeri HUF) by Achal Anil Bakeri to Rupa Bakeri Family Trust. Where the partition of the HUF is not undertaken, the Acquirer Trust 1 shall acquire 2,92,61,600 (41.83%) shares from Achal Anil Bakeri. The aforementioned acquisitions will thereby trigger Regulation 3 and Regulation 4 of the Takeover Regulations, 2011.

ii. Transfer of 82,91,440 (11.85%) (70,91,940 equity shares held by Rupa Achal Bakeri and 11,99,500 equity shares of Target Company that would be received upon the partition of the Achal Bakeri HUF) by Rupa Achal Bakeri to Achal Bakeri Family Trust. Where the partition of the HUF is not undertaken, the Acquirer Trust 2 shall acquire 70,91,940 shares from Rupa Achal Bakeri. The aforementioned acquisitions will trigger Regulation 3 and Regulation 4 of the Takeover Regulations, 2011.

iii. Transfer of 3,57,756 (99.99%) equity shares and 1,028 (100%) Compulsorily Convertible Preference Shares ("CCPS") held by Rupa Achal Bakeri in STPL to Achal Bakeri Family Trust. STPL holds 1,24,83,200 (17.85%) equity shares of the Target Company. The aforementioned acquisitions will trigger Regulation 5 of the Takeover Regulations, 2011.

D. The Settlor, Trustees and Beneficiaries of Acquirer Trusts are as under –

Table B - Details of Acquirer Trust 1 Settlor Trustee Beneficiaries Relationship Achal Anil 1. Rupa Achal 1. Rupa Achal Bakeri 1. Rupa Bakeri is the spouse of Bakeri Bakeri 2. Jonaki Achal Bakeri the settlor. 2. Achal Anil 3. Hirva Achal Bakeri 2. Jonaki Achal Bakeri and Hirva Bakeri (subject to receipt of Achal Bakeri are children of the approval of RBI for being a settlor. beneficiary in the Acquirer 3. All the beneficiaries and Trust, if required under Trustee are immediate family applicable laws) members.

Table C - Details of Acquirer Trust 2 Settlor Trustee Beneficiaries Relationship Anil Ratilal 1. Achal Anil 1. Achal Anil Bakeri Achal Anil Bakeri and Rupa Bakeri Bakeri 2. Jonaki Achal Bakeri Achal Bakeri are promoters of 2. Mrs. Rupa 3. Hirva Achal Bakeri the Target Company. Achal Bakeri (subject to receipt of Jonaki Bakeri and Hirva Bakeri approval of RBI for being are daughters of Achal Anil a beneficiary in the Bakeri and Rupa Bakeri Acquirer Trust, if required The Beneficiaries and trustees under applicable laws) are immediate relatives of the promoters.

E. Grounds for seeking exemption –

Acquirer Trusts under the respective exemption applications provided the justifications. The summary of the same is given below:

i. The proposed acquisition is further to an internal reorganization within the promoter family and is intended to streamline succession and to promote welfare of promoter family. The proposed acquisition would be a non-commercial transaction which would not affect or prejudice the interests of the public shareholders of the Target Company in any manner.

ii. The Acquirer Trusts are part of the 'promoter group' of the Target Company. The trustees and beneficiaries of the Acquirer Trusts are also promoter and members of the promoter group of the Target Company. Thus, the proposed acquisition would not result in any increase / decrease in the holding of the promoter or promoter group.

iii. The proposed acquisition of shares of the Target Company by the Acquirer Trusts and proposed acquisition of 99.99% equity shares and 100% CCPS of STPL by Acquirer Trust 2 would not result in change in control and management of the Target Company. Achal Anil Bakeri and Rupa Achal Bakeri (trustees of Acquirer Trusts) through whom control would be exercised over the assets of the Acquirer Trusts, are also part of the promoter and promoter group of the Target Company in their personal capacity.

iv. Since the Acquirer Trusts have been set up for the benefit of the members of promoter family, the trustees of the Acquirer Trusts will exercise control only as part of promoter family. Therefore, regardless of whether the trustees exercise control in their personal capacity or as trustees, the promoter family would continue to be in control of Symphony.

v. The Trusts are private family trusts. The trustees and beneficiaries comprise of members of promoter family and persons belonging to the category 'promoter and members of promoter group'. The structure does not lack transparency and does not in any way impact the interest of investors.

vi. The transfers to the Acquirer Trusts are for efficient succession planning.

vii. The Acquirer Trusts have undertaken to have complied with the all the conditions specified in SEBI Circular SEBI/HO/CFD/DCR1 /CIR/P/2017/131 dated December 22, 2017.

viii. Further, the Acquirer Trusts have also undertaken that no outsider other than promoter or member of promoter group shall be part of the Acquirer Trusts and any change in the trustees or beneficiaries of the Acquirer Trusts resulting in change in ownership or control of the Target Company shall be in compliance with Takeover Regulations and shall be adequately disclosed.

5. The Acquirer Trusts (vide the Application read with email dated December 18, 2019) have confirmed their compliance with the following Guidelines outlined in the Schedule to the SEBI Circular dated December 22, 2017:

i. The Trusts are in substance, only a mirror image of the Promoters’ holdings and consequently, there is no change of ownership or control of the shares or voting rights in the Target Company.

ii. Only individual promoters or their immediate relatives or lineal descendants are Trustees and beneficiaries.

iii. The beneficial interest of the beneficiaries of the Trusts have not been and will not in the future, be transferred, assigned or encumbered in any manner including by way of pledge/mortgage.

iv. In case of dissolution of the Trusts, the assets will be distributed only to the beneficiaries of the Trusts or to their legal heirs.

v. The Trustees will not be entitled to transfer or delegate any of their powers to any person other than one or more of themselves.

vi. Any change in the trustees / beneficiaries and any change in ownership or control of shares or voting rights held by the Trusts shall be disclosed within 2 days to the concerned stock exchanges with a copy endorsed to SEBI for its record.

vii. As far as the provisions of the SEBI Act and the regulations framed thereunder are concerned, the ownership or control of shares or voting rights will be treated as vesting not only with the Trustees but also indirectly with the beneficiaries.

viii. The liabilities and obligations of individual transferors under the SEBI Act and the regulations framed thereunder will not change or get diluted due to transfers to the Trusts.

ix. The Trusts shall confirm, on an annual basis, that they are in compliance with the exemption order passed by SEBI. The said confirmation shall be furnished to the company which it shall disclose prominently as a note to the shareholding pattern filed for the quarter ending March 31 each year, under Regulation 31 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

x. The Trusts shall get their compliance status certified from an independent auditor annually and furnish the certificate to the Stock Exchanges for public disclosure with a copy endorsed to SEBI for its records.

xi. The proposed acquisition is in accordance with the provisions of the Companies Act, 2013 and other applicable laws.

xii. The transferors are disclosed as promoters in the shareholding pattern filed with the Stock Exchanges for a period of at least 3 years prior to transfer (except for holding on account of inheritance), xiii. There is no layering in terms of trustees/beneficiaries in case of Trusts.

xiv. The Trust Deeds do not contain any limitation of liability of the trustees / beneficiaries in relation to the provisions of the SEBI Act and all regulations framed thereunder.

Consideration –

6. I have considered the Applications submitted by the Acquirer Trusts and other material available on record. Without reiterating the facts as stated above, the following is noted:

A. The Applications submitted are in respect of the proposed acquisitions of shares and voting rights in the Target Company i.e. Symphony Limited. The proposed acquisitions as detailed at paragraph 4C, which are to be made by Achal Bakeri Family Trust & Rupa Bakeri Family Trust i.e. the Proposed Acquirers, will attract the provisions of Regulations 3(1), 4 and 5(1) of the Takeover Regulations 2011.

B. Pursuant to the proposed acquisitions, the Proposed Acquirers will hold an aggregate of 55.39% of the paid up equity capital in the Target Company.

C. The objective of the proposed acquisitions is to streamline succession and promote welfare of the Promoter family.

D. There will be no change in control of the Target Company pursuant to the proposed acquisition, as stipulated under the SEBI Circular dated December 22, 2017.

E. The pre -acquisition and post-acquisition shareholding of the Promoters in the Target Company will remain the same (except that of the transferors and the transferees in the Direct Acquisition).

F. There will also be no change in the public shareholding of the Target Company

G. The Target Company shall continue to be in compliance with the minimum public shareholding requirements under the Securities Contracts Regulation Rules, 1957 ("SCRR") and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

H. The Proposed Acquirers have also confirmed that they are in compliance with the Guidelines outlined in the Schedule to the SEBI Circular dated December 22, 2017 (as reproduced at paragraph 5).

7. Considering the aforementioned, I am of the view that exemption as sought for in the Application (read with further submissions) may be granted to the Proposed Acquirer, subject to certain conditions as ordered herein below.

Order –

8. I, in exercise of the powers conferred upon me under Section 19 read with Section 11(1) and Section 11(2)(h) of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”) and Regulation 11(5) of the Takeover Regulations, hereby grant exemption to the proposed Acquirers viz. Rupa Bakeri Family Trust and Achal Bakeri Family Trust from complying with the requirements of Regulation 3(1), 4 and 5(1) of the Takeover Regulations with respect to the proposed acquisition/exercise of voting rights in respect of the Target Company, viz. Symphony Limited, by way of proposed transactions as mentioned in the Application.

9. The exemption so granted is subject to the following conditions:

i. The proposed acquisition shall be in accordance with the relevant provisions of the Companies Act, 2013 and other applicable laws.

ii. On completion of the proposed acquisition, the Proposed Acquirers shall file a report with SEBI within a period of 21 days from the date of such acquisition, as provided in the Takeover Regulations 2011.

iii. The statements/averments made or facts and figures mentioned in the Application and other submissions by the Proposed Acquirer are true and correct, iv. The Proposed Acquirers shall ensure compliance with the statements, disclosures and undertakings made in the Application. The Proposed Acquirers shall also ensure compliance with the provisions of the SEBI Circular dated December 22, 2017.

v. The Proposed Acquirers shall also ensure that the covenants in the Trust Deeds are not contrary to the above conditions and undertaking provided by the transferors. In such case, the Trust Deeds shall be suitably modified and expeditiously reported to SEBI.

vi. Any references to ‘voting trusts’, ‘addition of trusts as a beneficiary’ and ‘deposit of trust property with any other trusts’ shall be deleted from the trust deeds.

10. The exemption granted above is limited to the requirements of making open offer under the Takeover Regulations 2011 and shall not be construed as exemption from the disclosure requirements under Chapter V of the aforesaid Regulations; compliance with the SEBI (Prohibition of Insider Trading) Regulations, 2015; Listing Agreement/SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 or any other applicable Acts, Rules and Regulations.

11. The Applications dated June 27, 2019 and related correspondences filed by Achal Bakeri Family Trust and Rupa Bakeri Family Trust are accordingly disposed of.

Place: Mumbai G. MAHALINGAM Date: March 31, 2020 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA