Exemption order under regulation 11 of SEBI (SAST) Regulations, 2011 in respect of IVG Family Trust in the matter of "Vadilal Industries Limited"

WTM/GM/CFD/ 1 /2020–21 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTION 11(1) AND SECTION 11(2)(h) OF THE SEBI ACT 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 VADILAL INDUSTRIES LIMITED ACQUIRERS IVG FAMILY TRUST

BACKGROUND –

1. Vadilal Industries Limited (“Target Company”) was incorporated under the Companies Act, 1956 on April 28, 1982. The Registered Office of the Target Company is at Vadilal House, Shrimali Society, Nr. Navrangpura Railway Crossing, Navrangpura, Ahmedabad–380009. The shares of the Target Company are listed on BSE Limited (“BSE”) and National Stock Exchange of India Limited (“NSE”).

2. An Application dated February 25, 2019 read with e–mails dated May 13, 2019, June 12, 2019, October 22, 2019, January 3, 2020 and January 8, 2020 (“Application”) seeking exemption from the applicability of, inter alia, 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 acquisition of shares and voting rights in the Target Company, was received by SEBI from Virendra Ramchandra Gandhi on behalf of IVG Family Trust (“Acquirer Trust/Proposed Acquirer”).

Order in the matter of Vadilal Industries Limited – IVG Family Trust

3. Regulation 3, 4 and 5 of the Takeover Regulations state – “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. (2) No acquirer, who together with persons acting in concert with him, has acquired and holds in accordance with these regulations shares or voting rights in a target company entitling them to exercise twenty-five per cent or more of the voting rights in the target company but less than the maximum permissible non-public shareholding, shall acquire within any financial year additional shares or voting rights in such target company entitling them to exercise more than five per cent of the voting rights, unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with these regulations: Provided that such acquirer shall not be entitled to acquire or enter into any agreement to acquire shares or voting rights exceeding such number of shares as would take the aggregate shareholding pursuant to the acquisition above the maximum permissible non-public shareholding. Explanation — For purposes of determining the quantum of acquisition of additional voting rights under this sub-regulation,— (i) Gross acquisitions alone shall be taken into account regardless of any intermittent fall in shareholding or voting rights whether owing to disposal of shares held or dilution of voting rights owing to fresh issue of shares by the target company. (ii) In the case of acquisition of shares by way of issue of new shares by the target company or where the target company has made an issue of new shares in any given financial year, the difference between the pre-allotment and the post-allotment percentage voting rights shall be regarded as the quantum of additional acquisition.

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 December 31, 2019, the shareholding in the Target Company is as under:

TABLE I – SHAREHOLDING IN THE TARGET COMPANY (SOURCE: BSE WEBSITE) NAME NO. OF SHARES % SHAREHOLDING A. PROMOTER/ PROMOTER GROUP 1. VIRENDRA RAMCHANDRA GANDHI HUF 1,19,699 1.67 2. VIRENDRA RAMCHANDRA GANDHI 1,58,634 2.21 3. ILA VIRENDRA GANDHI 1,07,931 1.50 4. JANMAJAY VIRENDRA GANDHI 14,893 0.21 5. RAJESH R. GANDHI HUF 62,411 0.87 6. LAXMANBHAI R. GANDHI HUF* 4,241 0.06 7. VADILAL INTERNATIONAL PRIVATE LIMITED 28,09,704 39.09 8. VADILAL FINANCE COMPANY PRIVATE LIMITED 3,28,311 4.57 9. VERONICA CONSTRUCTIONS PRIVATE LIMITED 2,44,600 3.40 10. VADILAL MARKETING PRIVATE LIMITED 10,330 0.14 11. BYAD PACKAGING INDUSTRY PRIVATE LIMITED 10,137 0.14

12. VORTEX ICE – CREAM PRIVATE LIMITED (NOW KNOWN AS AXILROD 9,943 0.14 PRIVATE LIMITED) 13. VADILAL ENTERPRISES LIMITED 150 0.00 14. RAJESH RAMCHANDRA GANDHI 2,27,721 3.17 15. DEVANSHU LAXMANBHAI GANDHI 3,41,450 4.75 16. MAMTA RAJESHBHAI GANDHI 1,22,251 1.70 17. DEVAL DEVANSHU GANDHI 59,266 0.82 18. NITAALIASHEMALI PIYUSH SURATI 11,558 0.16 19. DHARINI KETAN KHAMBHATTA 811 0.01 20. KHEVNA RAJ RAMANLAL 811 0.01 21. NAVINCHANDRA CHIMANLAL MODI 7,504 0.10 TOTAL 46,52,356 64.73 B. PUBLIC SHAREHOLDING 25,35,474 35.27 C. TOTAL (A + B) 71,87,830 100.00 *PURSUANT TO THE FULL PARTITION OF LAXMANBHAI R. GANDHI HUF, THE SHARES OF VADILAL INDUSTRIES LIMITED ARE NOW HELD BY DEVANSHU LAXMANBHAI GANDHI. AS PER THE REGISTER OF SHAREHOLDERS, THE SHARES OF VADILAL INDUSTRIES LIMITED ARE STILL IN THE NAME OF LAXMANBHAI R GANDHI HUF. NECESSARY CHANGES FOR UPDATING REGISTER OF SHAREHOLDERS SHALL BE UNDERTAKEN AT THE EARLIEST.

B. As per the Application, i. Ilaben Virendra Gandhi has settled a Family Trust, viz. IVG Family Trust, by executing a Trust Deed dated March 13, 2018, which was amended and restated vide Deed of Amendment executed on January 7, 2020.

C. The Settlor, Trustees and beneficiaries of the aforementioned Acquirer Trust are as under –

ACQUIRER TRUST – IVG FAMILY TRUST SETTLOR TRUSTEE BENEFICIARIES RELATIONSHIP Ilaben 1. Virendra 1. Virendrabhai Ramchandra Gandhi The Trustee and Virendra Ramchandra 2. Ilaben Virendrabhai Gandhi (Wife) beneficiaries are either Gandhi Gandhi 3. Janmajay Virendrabhai Gandhi Promoters or their 2. Janmajay (Son) immediate relatives or their Virendra Gandhi. 4. Vivan Janmajay Gandhi (Grandson) lineal descendants.

D. The proposed acquisition involves:

i. Transfer of 4,01,157 (5.59%) equity shares from Virendra Ramchandra Gandhi, Virendra R. Gandhi HUF, Ilaben Virendra Gandhi and Janmajay Virendra Gandhi to IVG Family Trust. The aforementioned transaction will result in a direct acquisition of shares by the Acquirer Trust in the Target Company attracting Regulation 3 of the Takeover Regulations 2011 (“Direct Acquisition”). The shareholding in the Target Company subsequent to the Direct Acquisition will be as under:

TABLE II – PROPOSED SHAREHOLDING IN THE TARGET COMPANY (SOURCE: APPLICATION) NAME NO. OF SHARES % SHAREHOLDING A. PROMOTER/ PROMOTER GROUP 1. IVG FAMILY TRUST 4,01,157 5.59 2. RAJESH R. GANDHI HUF 62,411 0.87 3. LAXMANBHAI R. GANDHI HUF 4,241 0.06 4. VADILAL INTERNATIONAL PRIVATE LIMITED 28,09,704 39.09 5. VADILAL FINANCE COMPANY PRIVATE LIMITED 3,28,311 4.57 6. VERONICA CONSTRUCTIONS PRIVATE LIMITED 2,44,600 3.40 7. VADILAL MARKETING PRIVATE LIMITED 10,330 0.14 8. BYAD PACKAGING INDUSTRY PRIVATE LIMITED 10,137 0.14 9. VORTEX ICE – CREAM PRIVATE LIMITED (NOW KNOWN AS AXILROD 9,943 0.14 PRIVATE LIMITED) 10. VADILAL ENTERPRISES LIMITED 150 0.00 11. RAJESH RAMCHANDRA GANDHI 2,27,721 3.17 12. DEVANSHU LAXMANBHAI GANDHI 3,41,450 4.75 13. MAMTA RAJESHBHAI GANDHI 1,22,251 1.70 14. DEVAL DEVANSHU GANDHI 59,266 0.82 15. NITAALIASHEMALI PIYUSH SURATI 11,558 0.16 16. DHARINI KETAN KHAMBHATTA 811 0.01 17. KHEVNA RAJ RAMANLAL 811 0.01 18. NAVINCHANDRA CHIMANLAL MODI 7,504 0.10 TOTAL 46,52,356 64.73 B. PUBLIC SHAREHOLDING 25,35,474 35.27 C. TOTAL (A + B) 71,87,830 100.00

E. In addition to the Direct Acquisition, the Acquirer Trust will acquire shares in the Promoter Companies (which are owned and controlled by the Promoter family) resulting in an indirect acquisition of shares/control in the Target Company as under:

i. Vadilal International Private Limited, Vadilal Finance Company Private Limited and Veronica Constructions Private Limited form part of the Promoter and Promoter Group of the Target Company (See Tables I and II). It is proposed to transfer the shares of existing shareholders in Vadilal International Private Limited, Vadilal Finance Company Private Limited and Veronica Constructions Private Limited to the Acquirer Trust as under: TABLE III – PROPOSED TRANSFER OF SHARES OF EXISTING SHAREHOLDERS IN VADILAL INTERNATIONAL PRIVATE LIMITED TO IVG FAMILY TRUST SHAREHOLDING NAME OF SHAREHOLDERS NO. OF SHARES % SHAREHOLDING ILABEN VIRENDRA GANDHI 1800 1.20 JANMAJAY VIRENDRA GANDHI VIRENDRA RAMCHANDRA GANDHI ILABEN VIRENDRA GANDHI 21 0.01 VIRENDRA RAMCHANDRA GANDHI JANMAJAY VIRENDRA GANDHI JANMAJAY VIRENDRA GANDHI 9 0.01 VIRENDRA RAMCHANDRA GANDHI ILABEN VIRENDRA GANDHI DHARINI KETAN KHAMBHATTA 4 0.00 VIRENDRA RAMCHANDRA GANDHI JANMAJAY VIRENDRA GANDHI KHEVNA RAJ SHAH 4 0.00 VIRENDRA RAMCHANDRA GANDHI JANMAJAY VIRENDRA GANDHI VIRENDRA RAMCHANDRA GANDHI 53 0.04 JANMAJAY VIRENDRA GANDHI VIRENDRA RAMCHANDRA GANDHI 1764 1.18 JANMAJAY VIRENDRA GANDHI ILABEN VIRENDRA GANDHI VIRENDRA RAMCHANDRA GANDHI 12 0.01 ILABEN VIRENDRA GANDHI JANMAJAY VIRENDRA GANDHI VIRENDRA RAMCHANDRA GANDHI 46,289 30.86 JANMAJAY VIRENDRA GANDHI VIRENDRA RAMCHANDRA GANDHI 44 0.03 TOTAL 50,000 33.33

TABLE IV – PROPOSED TRANSFER OF SHARES OF EXISTING SHAREHOLDERS IN VADILAL FINANCE COMPANY PRIVATE LIMITED TO IVG FAMILY TRUST SHAREHOLDING NAME OF SHAREHOLDERS NO. OF SHARES % SHAREHOLDING VIRENDRA R GANDHI HUF 54 0.54 ILABEN VIRENDRA GANDHI ILABEN VIRENDRA GANDHI 47 0.47 VIRENDRA RAMCHANDRA GANDHI VIRENDRA RAMCHANDRA GANDHI 1,353 13.53 ILABEN VIRENDRA GANDHI JANMAJAY VIRENDRA GANDHI 18 0.18 VIRENDRA RAMCHANDRA GANDHI DHARINI KETAN KHAMBHATTA 9 0.09 VIRENDRA RAMCHANDRA GANDHI KHEVNA RAJ SHAH 9 0.09 VIRENDRA RAMCHANDRA GANDHI VIRENDRA RAMCHANDRA GANDHI 149 1.49 DEVANSHUBHAI LAXMANBHAI GANDHI VIRENDRA RAMCHANDRA GANDHI 10 0.10 ILABEN VIRENDRA GANDHI POPATLAL G. SHAH* VIRENDRA RAMCHANDRA GANDHI 77 0.77 ILABEN VIRENDRA GANDHI 1,500 15.00 TOTAL 3,226 32.26 *POPATLAL G. SHAH HAD EXPIRED ON JUNE 28, 2005. AS ON THE DATE OF FILING OF THE APPLICATION, SHARES OF VADILAL FINANCE COMPANY PRIVATE LIMITED ARE HELD IN THE NAME OF POPATLAL G. SHAH.

TABLE V – PROPOSED TRANSFER OF SHARES OF EXISTING SHAREHOLDERS IN VERONICA CONSTRUCTIONS PRIVATE LIMITED TO IVG FAMILY TRUST SHAREHOLDING NAME OF SHAREHOLDERS NO. OF SHARES % SHAREHOLDING ILABEN VIRENDRA GANDHI 300 3.00 JANMAJAY VIRENDRA GANDHI GIRABEN H. SHAH ILABEN VIRENDRA GANDHI 1,241 12.41 JANMAJAY VIRENDRA GANDHI JANMAJAY VIRENDRA GANDHI 1,500 15.00 TOTAL 3,041 30.41 ii. The aforementioned transactions (at paragraph 4E) will also result in an indirect acquisition of shares/control in the Target Company i.e. acquisition by IVG

Family Trust of shares held by Vadilal International Private Limited, Vadilal Finance Company Private Limited and Veronica Constructions Private Limited, attracting Regulation 5 of the Takeover Regulations 2011 (“Indirect Acquisition”) as under:

TABLE VI – SHAREHOLDING IN THE PROMOTER COMPANY BEING ACQUIRED BY THE ACQUIRER TRUST (SOURCE: APPLICATION) NAME OF PROMOTER % OF SHARES OF SUCH PROMOTER % OF SHARES HELD BY RESPECTIVE COMPANY COMPANY BEING TRANSFERRED TO IVG PROMOTER / PROMOTER GROUP FAMILY TRUST COMPANY IN THE TARGET COMPANY VADILAL INTERNATIONAL 33.33 39.09 PRIVATE LIMITED

VADILAL FINANCE COMPANY 32.26 4.57 PRIVATE LIMITED

VERONICA CONSTRUCTIONS 30.41 3.40 PRIVATE LIMITED

F. There would be no alteration in the total equity share capital of the Target Company as a result of the proposed acquisitions (at paragraph 4D and 4E).

G. Grounds for seeking exemption – a. The proposed transfer is only in the nature of inter–se transfer of shares within the Promoter / Promoter Group. b. The proposed acquisition is intended to streamline succession and welfare of the members of the Virendra Ramchandra Gandhi Family, being members of the Promoter / Promoter Group of the Target Company.

H. The Acquirer Trust (vide an e–mail dated January 8, 2020 through submission of the Annexure to the SEBI Dispensation Application dated January 07, 2020 and the Deed of Amendment executed on January 7, 2020) has confirmed its compliance with the following Guidelines outlined in the Schedule to the SEBI Circular dated December 22, 2017 – i. The Trust is 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. The beneficial interest of the beneficiaries of the Trust has not been and will not in the future, be transferred, assigned or encumbered in any manner including by way of pledge/mortgage. iii. In case of dissolution of the Trust, the assets will be distributed only to the beneficiaries of the trust or to their legal heirs iv. The Trustees will not be entitled to transfer or delegate any of their powers to any person other than one or more of themselves. v. Any change in the trustees / beneficiaries and any change in ownership or control of shares or voting rights held by Trust shall be disclosed within 2 days to the concerned stock exchanges with a copy endorsed to SEBI for its record. vi.

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. vii. 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 Trust. viii. The Trust shall confirm, on an annual basis, that it is 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. ix. The Trust shall get its 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. x. The proposed acquisition is in accordance with the provisions of the Companies Act, 2013 and other applicable laws. xi.

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). xii. There is no layering in terms of trustees/beneficiaries in case of Trusts. xiii. The Trust Deed does 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 –

5. I have considered the Application submitted by Virendra Ramchandra Gandhi and other material available on record. Without reiterating the facts as stated above, the following is noted:

A. The Application submitted is in respect of the proposed acquisitions of shares and voting rights in the Target Company i.e. Vadilal Industries Limited. The proposed acquisitions as detailed at paragraphs 4D and 4E, which are to be made by IVG Family Trust i.e. the Proposed Acquirer, will attract the provisions of Regulations 3, 4 and 5 of the Takeover Regulations 2011.

B. Pursuant to the proposed acquisitions, the Proposed Acquirer will directly hold an aggregate of 5.59% of the paid up equity capital in the Target Company.

C. 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.

D. 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).

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

F. 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.

G. As regards the Guideline outlined in the Schedule to the SEBI Circular dated December 22, 2017 i.e. “only individual promoters or their immediate relatives or lineal descendants are Trustees and beneficiaries.” it is noted that Virendra Gandhi and Janmajay Gandhi are not individual promoters of the Target Company but rather form part of the promoter group of the Target Company. However, Virendra Gandhi (Trustee of the Acquirer Trust) is nonetheless an immediate relative (brother) of an individual promoter of the Target Company i.e. Rajesh Gandhi. Further, Janmajay Gandhi is the son of Virendra Gandhi. The objective of the proposed acquisitions is to streamline succession and promote welfare of the members of the Virendra Ramchandra Gandhi Family, being members of the Promoter / Promoter Group of the Target Company.

6. 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 –

7. 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 Acquirer, viz. IVG Family Trust, from complying with the requirements of Regulations 3, 4 and 5 of the Takeover Regulations with respect to the proposed acquisitions in the Target Company, viz. Vadilal Industries Limited, by way of proposed transactions as mentioned in the Application.

8. 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 Acquirer shall file a report with SEBI within a period of 21 days from the date of such acquisition, as provided in the Takeover Regulations. 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 Acquirer shall ensure compliance with the statements, disclosures and undertakings made in the Application. The Proposed Acquirer shall also ensure compliance with the provisions of the SEBI Circular dated December 22, 2017.

v. The Proposed Acquirer shall also ensure that the covenants in the Trust Deed are not contrary to the above conditions and undertaking provided by the transferors. In such case, the Trust Deed shall be suitably modified and expeditiously reported to SEBI. vi. All references to ‘voting trusts’ and ‘deposit of trust property with any other trusts’ shall be deleted from the Trust Deed.

9. The exemption granted above is limited to the requirements of making open offer under the Takeover Regulations 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.

10. The Application dated February 25, 2019 read with e–mails dated May 13, 2019, June 12, 2019, October 22, 2019, January 3, 2020 and January 8, 2020, filed by Virendra Ramchandra Gandhi on behalf of IVG Family Trust, is accordingly disposed of.

Place: Mumbai G. MAHALINGAM Date: April 8, 2020 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA