Exemption order under regulation 11 of SEBI (SAST) Regulations, 2011 in the matter of Vascon Engineers Limited

WTM/GM/CFD/54/2020–21 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 VASCON ENGINEERS LIMITED ACQUIRER VASUDEVAN FAMILY TRUST

BACKGROUND –

1. Vascon Engineers Limited (“Target Company”) is a company incorporated under the Companies Act, 1956. The Company is engaged in the business of commercial, industrial and residential real estate, and also provides EPC services. The equity shares of the Target Company are listed on the BSE Limited (“BSE”) and National Stock Exchange of India (“NSE”).

2. An Application dated November 25, 2019 (“Application”) inter alia seeking exemption from the applicability of Regulation 3 and 4 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“Takeover Regulations 2011”) in the matter of proposed direct acquisition of shares in the Target Company was received by SEBI from Mr. Ramamoorthy Vasudevan on behalf of Vasudevan Family Trust (“Acquirer Trust/Proposed Acquirer”).

3. Regulation 3 and 4 of the Takeover Regulations 2011 states as under – “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. Order in the matter of Vascon Engineers Limited (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.”

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

A. The shareholding of the Target Company as on the date of application, is as under:

TABLE 1: SHAREHOLDING IN THE TARGET COMPANY (SOURCE: BSE WEBSITE & APPLICATION) NAME NO. OF SHARES % SHAREHOLDING A PROMOTER/PROMOTER GROUP RAMAMOORTHY VASUDEVAN 4,24,28,701 23.82% LALITHA VASUDEVAN 89,19,538 5.01% SIDDHARTH VASUDEVAN MOORTHY 28,28,651 1.59% SOWMYA VASUDEVAN MOORTHY 7,00,294 0.39% BELLFLOWER PREMISES PRIVATE LIMITED 5,20,328 0.29% VATSALYA ENTERPRISES PRIVATE LIMITED 90,78,947 5.10% TOTAL PROMOTER HOLDING 6,44,76,459 36.19% B PUBLIC SHAREHOLDING 11,36,60,257 63.81% TOTAL (A + B) 17,81,36,716 100.00%

B. As per the Application i. Ramamoorthy Vasudevan is the Promoter of the Target Company. Mr. Vasudevan along with the Promoter Group collectively holds 36.19% of the share capital of the Target Company.

ii. The Acquirer Trust is a private family trust viz. Vasudevan Family Trust having Address: Bungalow No. 1, Vatsalya The Woods, Lane E, Off North Main Road, Koregaon Park, Pune 411 001. The Acquirer Trust has been settled under the provisions of the Indian Trusts Act, 1882 for the benefit of the beneficiaries of the Acquirer Trust. The beneficiaries of the Acquirer Trust are the immediate relatives of the Promoter of Vascon Engineers and part of Promoter/Promoter Group.

iii. Acquirer Trust proposes to acquire 5,13,48,239 shares (28.83%) of the Target Company from Ramamoorthy Vasudevan (4,24,28,701 shares representing 23.82%) and Lalitha Vasudevan (89,19,538 shares representing 5.01%).

C. The Settlor, Trustees and beneficiaries of the aforementioned Acquirer Trusts are as under – TABLE II: DETAILS OF ACQUIRER TRUST Settlor Trustees Beneficiaries Relationship Ramamoorthy 1) Ramamoorthy Vasudevan 1) Ramamoorthy Vasudevan The Beneficiaries and trustees are Vasudevan 2) Lalitha Vasudevan 2) Lalitha Vasudevan immediate relatives/lineal 3) Siddharth Vasudevan descendants of the promoters. Moorthy 4) Sowmya Vasudevan Moorthy 5) Eligible spouse of Siddharth Vasudevan Moorthy 6) Eligible spouse of Sowmya Vasudevan Moorthy 7) Lineal descendants of Siddharth Vasudevan Moorthy 8) Lineal descendants of Sowmya Vasudevan Moorthy

D. The proposed acquisition involves: i. Direct acquisition of 5,13,48,239 shares (28.83%) of the Target Company by the Acquirer Trust. ii. There would be no alteration to the total equity share capital or voting rights of Target Company as a result of the Proposed Indirect Acquisition iii. The shareholding pattern of Target Company (pre and post the proposed Acquisition) will be as follows: TABLE III – SHAREHOLDING PATTERN OF TARGET COMPANY (PRE AND POST THE PROPOSED ACQUISITION) SHAREHOLDERS’ BEFORE THE PROPOSED ACQUISITION AFTER THE PROPOSED ACQUISITION CATEGORY NUMBER OF EQUITY % OF EQUITY SHARES/ NUMBER OF EQUITY % OF EQUITY SHARES/ SHARES/ TOTAL VOTING TOTAL VOTING CAPITAL SHARES/ TOTAL VOTING TOTAL VOTING CAPITAL RIGHTS HELD HELD RIGHTS HELD HELD PROMOTER AND PROMOTER GROUP OTHER THAN ACQUIRER RAMAMOORTHY 4,24,28,701 23.82% 0 0 VASUDEVAN LALITHA VASUDEVAN 89,19,538 5.01% 0 0 SIDDHARTH VASUDEVAN MOORTHY 2,828,651 1.59% 2,828,651 1.59% SOWMYA VASUDEVAN 700,294 0.39% 700,294 0.39% MOORTHY BELLFLOWER PREMISES PRIVATE LIMITED 520,328 0.29% 520,328 0.29%

VATSALYA ENTERPRISES PRIVATE LIMITED 90,78,947 5.10% 90,78,947 5.10% VASUDEVAN FAMILY TRUST 0 0 5,13,48,239 28.83% TOTAL – PROMOTER AND PROMOTER GROUP 6,44,76,459 36.19% 6,44,76,459 36.19% PUBLIC 11,36,60,257 63.81% 11,36,60,257 63.81% GRAND TOTAL 17,81,36,716 100% 17,81,36,716 100%

E. Grounds for seeking exemption – A. Pursuant to the proposed acquisition, the Acquirer Trust shall form part of promoter group of the Target Company. B. The Acquirer Trust is a family trust and the trustees are part of the promoter/promoter group. C. The proposed acquisition is only an internal reorganization of the shareholding of the Target Company within promoter’s family for the purpose of a private family arrangement for the benefit of immediate relatives of the promoter. D. There is no change in control of the Target Company and the persons who are currently promoter/promoter group and who are in control of the target company will continue to retain effective control of the target company in their capacity a trustees and beneficiaries of the Acquirer Trust. E. The proposed acquisition will not be prejudicial to the interests of the public shareholders of the Target Company. F. The overall promoter shareholding in the target company will remain unchanged pursuant to the proposed acquisition. The pre-acquisition and post-acquisition shareholding of promoter and promoter group would remain same at 36.19 %.

5. The Acquirer Trust has confirmed 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 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 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 –

6. I have considered the Application submitted by the Acquirer Trust 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 direct acquisition of shares and voting rights in the Target Company - Vascon Engineers Limited. The proposed Acquisition, detailed at paragraph 4D above, will attract the provisions of Regulation 3 and 4 of the Takeover Regulations 2011 as per the Application made on behalf of the proposed acquirer.

B. Pursuant to the proposed acquisition, the Acquirer Trust would hold 28.83% equity shares in Target Company.

C. The objective of the proposed acquisitions is to achieve efficient succession planning and for holding the controlling interest in the Target Company in one entity rather than spreading the holding amongst different individuals which may not be in the best interest of the Target Company. Efficient succession planning for the next generation is being facilitated through the Acquirer Trust.

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.

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 and Regulation 11(5) of the Takeover Regulations 2011, hereby grant exemption to the Proposed Acquirer, viz. Vasudevan Family Trust from complying with the requirements of Regulation 3 and 4 of the Takeover Regulations 2011 with respect to the proposed direct acquisitions in the Target Company, viz. Vascon Engineers 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 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 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 Acquirer 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 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.

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 Application and related correspondences, filed by Vasudevan Family Trust are accordingly disposed of.

PLACE: MUMBAI G. MAHALINGAM DATE: DECEMBER 17, 2020 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA