Exemption order under regulation 11 of SEBI (SAST) Regulations, 2011 in the matter of Bharat Forge Ltd and 6 other companies

WTM/GM/CFD/ DCR1/27 /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 COMPANIES BHARAT FORGE LIMITED BF UTILITIES LIMITED BF INVESTMENT LIMITED KALYANI STEELS LIMITED KALYANI INVESTMENT COMPANY LIMITED AUTOMOTIVE AXLES LIMITED HIKAL LIMITED

ACQUIRER BABASAHEB KALYANI FAMILY TRUST

BACKGROUND – 1. An Application dated January 30, 2020 read with e–mails dated March 24, 2020, April 18, 2020, May 04, 2020, May 21, 2020, June 19, 2020 and August 10, 2020 (“Application”) seeking exemption from the applicability of Regulations 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 indirect acquisition of shares and voting rights in the below-mentioned seven Target Companies, has been received by SEBI on behalf of Babasaheb Kalyani Family Trust (“Acquirer Trust/Proposed Acquirer”):

Order in the matter of Bharat Forge Ltd. and other companies (A) Details of Bharat Forge Limited (Target Company 1 / TC 1) Name Bharat Forge Limited Date of Incorporation 19.06.1961 IPO Listed at BSE on 10.03.1964 Listing status Listed in BSE and NSE (B) Details of BF Utilities Limited (Target Company 2 / TC 2)

Name BF Utilities Limited Date of Incorporation 15.09.2000 Year of IPO Listing at BSE on 20.08.2001 Listing status Listed on BSE and NSE (C) Details of BF Investment Limited (Target Company 3 / TC 3)

Name BF Investment Ltd. Date of Incorporation 26.05.2009 Year of IPO Listing at BSE & NSE on 14.01.2011 Listing status BSE and NSE (D) Details of Kalyani Steels Limited (Target Company 4 / TC 4)

Name Kalyani Steels Limited Date of Incorporation 28.02.1973 Year of IPO Listing at BSE on 27.06.1984 Listing status BSE and NSE (E) Details of Kalyani Investment Company Limited (Target Company 5 / TC 5) Name Kalyani Investment Company Limited Date of Incorporation 25.06.2009 Year of IPO Listing at BSE on 14.01.2011 Listing status Listed on BSE and NSE (F) Details of Automotive Axles Limited (AAL / Target Company 6 / TC 6) Name Automotive Axles Limited Date of Incorporation 21.04.1982 Year of IPO Listing at BSE on 07.11.1983 Listing status Listed on BSE and NSE Additional Details i. TC 3 and Meritor Heavy Vehicles Systems, LLC (‘MHVS’) are co-promoters of AAL. ii. TC 3 and MHVS hold 35.52% shares each in AAL iii. MHVS is a foreign joint venture partner, and is not directly/indirectly controlled by BNK. (G) Details of Hikal Limited (Hikal / Target Company 7 / TC 7) Name Hikal Limited Date of Incorporation 08.07.1988 Year of IPO Listing at BSE on 10.01.1995 Listing status Listed on BSE and NSE Additional Details i. TC 3 and TC 5 along with Hiremath Group are co-promoters of Hikal. ii. TC 3 and TC 5 hold 2.65% and 31.36% shares respectively in Hikal. iii. Hiremath Group is not directly or indirectly controlled by BNK. BNK’s sister is married into and forms part of the Hiremath family.

2. Regulations 4 and 5 of the Takeover Regulations state – “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…”

3. In the aforementioned Application and subsequent submissions, the following was, inter alia, stated: (a) As per the Application, Mr. Babasaheb Neelkanth Kalyani has settled a Family Trust, viz. Babasaheb Kalyani Family Trust, by executing a Trust Deed dated December 27, 2019, which was amended vide Deed of Amendment executed on June 19, 2020. The Settlor, Trustees and beneficiaries of the aforementioned Acquirer Trust (“Acquirer Trust/Proposed Acquirer”) are as under –

ACQUIRER TRUST – BALASAHEB KALYANI FAMILY TRUST SETTLOR TRUSTEE BENEFICIARIES RELATIONSHIP Mr. Babasaheb Mr. Amit B. 1. Sunita B. Kalyani (Spouse) The Trustees and Neelkanth Kalyani Kalyani 2. Amit B. Kalyani(Son) beneficiaries are 3. Aadit Amit Kalyani (son of immediate (Grandson) settler) relatives/ lineal 4. Shriya Amit Kalyani descendants of (Granddaughter) the 5. Vasudha Amit Kalyani Ms. Sunita B. Settlor/Trustees. (Granddaughter) Kalyani 6. Other Lineal Descendants of Amit B. (Spouse of Kalyani Settlor)

(b) Mr. Babasaheb Neelkanth Kalyani (‘BNK’) directly holds the below mentioned shareholding and controls the following unlisted private limited companies (collectively referred to as ‘Promoter Controlled Companies/PCCs’) incorporated in India: (i) 89.85% in Hibiscus Investment and Finance Pvt. Ltd. (PCC1) (ii) 90.05% in Peach Blossom Investment Pvt. Ltd. (PCC2) (iii) 90.05% in Rosario Investment Pvt. Ltd. (PCC3) (iv) 90.05% in Yokoha Investment Pvt. Ltd. (PCC4)

(c) Mr. Babasaheb Neelkanth Kalyani has proposed to transfer his entire shareholding in abovementioned PCCs to Babasaheb Kalyani Family Trust for the purpose of welfare and succession planning of his family members. The same would result in the indirect acquisition of shares in, and control of the abovementioned 7 Target companies by the Acquirer Trust / Proposed Acquirer.

(d) Details of proposed acquisitions, along with pre-acquisition shareholdings of the promoter group in the Target Companies as on January 30, 2020 (i.e. date of Application), as noted from the Application, are as follows:

A. Bharat Forge Limited ( TC 1) (Indirect Acquisition)  The abovementioned PCCs collectively have indirect control over 42.97% shares of the paid up capital of Bharat Forge Limited through their group companies.

 Due to the aforesaid proposed transfer of shares, Babasaheb Kalyani Family Trust shall acquire indirect control over 42.97% shares of the paid-up capital of Bharat Forge Limited.

 The shareholding pattern of Target Company 1 (pre and post the proposed Acquisition) will be as follows:

Shareholding Pattern – Bharat Forge Limited (TC 1) Pre holding Post holding No. of shares % No. of shares % Promoter 21,30,61,840 45.76 21,30,61,840 45.76 Public 25,25,08,392 54.24 25,25,08,392 54.24 Total 46,55,70,232 100.00 46,55,70,232 100.00

B. BF Utilities Limited (TC 2) (Indirect Acquisition)  The abovementioned PCCs have indirect control over 53.23% shares of the paid up capital of BF Utilities Limited through their group companies.

 Due to the aforesaid proposed transfer of shares, Babasaheb Kalyani Family Trust shall acquire indirect control over 53.23% shares of the paid-up capital of BF Utilities Limited.

 The shareholding pattern of Target Company 2 (pre and post the proposed Acquisition) will be as follows:

Shareholding Pattern – BF Utilities Limited (TC 2) Pre holding Post holding No. of shares % No. of shares % Promoter 2,10,85,215 55.98 2,10,85,215 55.98 Public 1,65,82,413 44.02 1,65,82,413 44.02 Total 3,76,67,628 100.00 3,76,67,628 100.00

C. BF Investment Limited (TC 3) (Indirect Acquisition)  The above mentioned PCCs indirectly hold 70.53% shares in Target Company 3.

 Due to the aforesaid proposed transfer of shares, Babasaheb Kalyani Family Trust shall acquire indirect control over 70.53% shares in BF Investment Limited.

 The shareholding pattern of Target Company 3 (pre and post the proposed Acquisition will be as follows):

Shareholding Pattern – Target Company 3 Name of promoter Pre holding Post holding No. of shares % No. of shares % Promoter 2,76,40,976 73.38 2,76,40,976 73.38 Public 1,00,26,652 26.62 1,00,26,652 26.62 Total 3,76,67,628 100 3,76,67,628 100

D. Kalyani Steels Limited (TC 4) (Indirect Acquisition)  The above mentioned PCCs collectively and indirectly hold 64.49% shares and control of TC 4, as mentioned below:

 The above mentioned PCCs directly and indirectly hold 99.33% shares in Ajinkya Investment and Trading Limited and 95.73% shares in Sundaram Investment and Trading Pvt. Limited respectively.

 Ajinkya holds 7.47% shares in TC 4, Sundaram holds 17.79% shares in TC 4 and BF Investment Limited (TC 3) holds 39.06% shares in TC 4.

 Lohgaon Trading Company Private Limited and Ajinkyatara Trading Co. Ltd. hold 0.16% and 0.01% shares respectively in TC 4. Both these companies are controlled by PCC.

 Due to the aforesaid proposed transfer of shares, Babasaheb Kalyani Family Trust shall acquire indirect control over 64.49% shares in Kalyani Steels Limited.

 The total promoter shareholding in TC 4 is 64.71%.

 The shareholding pattern of TC 4 (pre and post the proposed Acquisition will be as follows):

Shareholding Pattern – Target Company 4 Pre holding Post holding No. of shares % No. of shares % Promoter 2,82,48,323 64.71 2,82,48,323 64.71 Public 1,54,04,737 35.29 1,54,04,737 35.29 Total 4,36,53,060 100.00 4,36,53,060 100.00

E. Kalyani Investment Company Limited (TC 5) (Indirect Acquisition)  The above mentioned PCCs indirectly hold 73.39% shareholding in TC 5. The details are as under:

 The above mentioned PCCs directly and indirectly hold 99.33% shares in Ajinkya Investment and Trading Limited and 95.73% shares in Sundaram Investment and Trading Pvt. Limited respectively.

 Ajinkya Investment and Trading Company; and Sundaram Trading and Investment Private Limited are promoter entities of TC 5 holding 12.28% and 60.94% shares respectively. Further, 0.16% and 0.01% shares of TC 5 are held by Lohagaon Trading Company Private Limited and Ajinkyatara Trading Company Limited respectively, which are wholly owned subsidiaries of PCCs. Therefore PCCs directly and indirectly hold 73.39% shares of TC 5.

 Due to the aforesaid proposed transfer of shares, Babasaheb Kalyani Family Trust shall acquire indirect control over 73.39% shares in Kalyani Investment Company Limited.

 The shareholding pattern of the TC 5 (pre and post the proposed Acquisition will be as follows):

Shareholding Pattern – Kalyani Investment Company Limited (TC 5) Pre holding Post holding No. of shares % No. of shares % Promoter 32,12,985 73.60 32,12,985 73.60 Public 11,52,321 26.40 11,52,321 26.40 Total 43,65,306 100.00 43,65,306 100.00

F. Automotive Axles Limited (TC 6 / AAL) (Indirect Acquisition)  The above mentioned PCCs indirectly hold 70.53% shareholding in BF Investment Limited (TC 3). BF Investment Limited (TC 3) and Meritor Heavy Vehicles Systems, LLC (‘MHVS’) are co-promoters of AAL holding 35.52% each in AAL. Rest 28.96% is held by the Public shareholders. MHVS is a foreign joint venture partner, and is not directly/indirectly controlled by BNK.

 Due to the aforesaid proposed transfer of shares, Babasaheb Kalyani Family Trust shall acquire indirect control over 35.52% shares in Automotive Axles Limited.

 The shareholding pattern of Target Company 6 (pre and post the proposed Acquisition will be as follows):

Shareholding Pattern – Automotive Axles Limited (TC 6) Name of promoter Pre holding Post holding No. of shares % No. of shares % BF Investment Ltd 53,67,806 35.52 53,67,806 35.52 MHVS* 53,67,275 35.52 53,67,275 35.52 Promoter 107,35,081 71.04 107,35,081 71.04 Public 43,76,894 28.96 43,76,894 28.96 * Total 1,51,11,975 100.00 1,51,11,975 100.0 0

*Meritor Heavy Vehicles Systems, LLC

G. Hikal Limited (TC 7) (Indirect Acquisition)  The above mentioned PCCs indirectly hold 70.53% of the shares of BF Investment Limited (TC 3) and 73.39 % of the shares of Kalyani Investment Company Limited (TC 5). These two promoter entities,

BF Investment Limited (TC 3) and Kalyani Investment Company Limited (TC 5) hold 2.65% and 31.36 % of the shares of the Target Company 7 (i.e. TC 3 and TC 5 together hold 34.01% shares in Hikal Limited – TC 7).

 Due to the aforesaid proposed transfer of shares, Babasaheb Kalyani Family Trust shall acquire indirect control over 34.01% shares in Kalyani Steels Limited.

 Hiremath Group, along with TC 3 and TC 5, is a co-promoter of Hikal Ltd (TC 7). Hiremath Group is not directly or indirectly controlled by BNK. BNK’s sister is married into and forms part of the Hiremath family.

 The total promoter shareholding in TC 7 is 68.77%.

 The shareholding pattern of Target Company 7 (pre and post the proposed Acquisition will be as follows):

Shareholding Pattern – Hikal Limited (TC 7) Pre holding Post holding No. of shares % No. of shares % Promoter 8,47,92,764 68.77 8,47,92,764 68.77 Public 3,85,07,986 31.23 3,85,07,986 31.23 Total 12,33,00,750 100.00 12,33,00,750 100.00 (e) Since the aforementioned transactions (i.e. acquisition of shares of PCCs by the Acquirer Trust / Proposed Acquirer, which are currently held by Babasaheb Neelkanth Kalyani) would result in an indirect acquisition of shares and control in the abovementioned 7 Target Companies by the Acquirer Trust / Proposed Acquirer, the same would attract the applicability of Regulations 4 and 5 of the Takeover Regulations 2011.

GROUND FOR SEEKING EXEMPTIONS –

4. The following grounds have been cited while seeking exemption:

(a) The proposed acquisition is intended to streamline succession and welfare of BNK (being member of the promoter and promoter group of the Target Companies) and BNK’s immediate relatives/lineal descendants. (b) The proposed transaction is only in the nature of transfer of equity shares of the promoter controlling companies within the promoter / promoter group, with no change in the overall promoter / promoter group shareholding in the Target companies. (c) The proposed acquisition would not result in any change in the direct shareholding pattern of the Target companies, nor would it result in any effective change in control of the Target companies. (d) The proposed acquisition would also not result in any change in control of the board of directors of the Target companies. The proposed acquisition would not have any adverse impact on the target companies or the wider securities market in India and is not expected to cause any appreciable adverse effect on the price of the shares of the target companies.

(e) The proposed acquisition is only an arrangement wherein the interest of the beneficiaries directly in the promoter controlling companies and indirectly in the target companies will be held / maintained by SBK and ABK, who are immediate relatives of BNK, as trustees of the family trust. (f) It is a non-commercial transaction and therefore, it will not affect or prejudice the interests of the public shareholders of the Target companies in any manner and there will be no reduction in the holding of the public shareholders in the Target companies. (g) The Application has been submitted in a format compliant with SEBI circular dated 22.12.2017 (“Circular”). The Acquirer Trust has confirmed its compliance with the following Guidelines outlined in the Schedule to the SEBI Circular dated December 22, 2017 – i) The Acquirer Trust is in substance, only a mirror image of the promoter’s holdings and consequently, there is no change of ownership or control of the shares or voting rights in the target companies 1 to 7. ii) Only individual promoters or their immediate relatives or lineal descendants are trustees and beneficiaries. iii) The beneficial interest of the beneficiaries of the family trust has not been and will not in the future be transferred, assigned or encumbered in any manner including by way pledge/mortgage. iv) In case of dissolution of the family trust, the assets will be distributed only to the beneficiaries of the trust 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 to themselves.

vi) 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. 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 Trust. ix) 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. x) 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. xi) The proposed transaction is in accordance with the provisions of the Companies Act, 2013 and other applicable laws. xii) The transferor (i.e. BNK) in the proposed transaction has been disclosed as promoters in the shareholding pattern filed by the primary target companies with the stock exchanges for a period of at least 3 years prior to the date of present application.

xiii) There is no layering in terms of trustees / beneficiaries in the case of the Family Trust. xiv) The trust deed of the Family Trust does not contain any limitation of liability of the trustees / beneficiaries in relation to the provisions of the SEBI act, 1992 and all regulations framed thereunder.

(h) The Acquirer Trust undertakes to ensure that any appointment of additional/successor trustees or beneficiaries to the family trust in future shall be in conformity with the provisions of SEBI circular SEBI/HO/CFD/DCR1/CIR/P/2017/131 dated 22.12.2017, as amended from time to time.

CONSIDERATION –

5. I have considered the Application submitted on behalf of the Acquirer Trust / Proposed Acquirer 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 Companies 1 to 7. The proposed acquisitions as detailed above, which are to be made by Babasaheb Kalyani Family Trust i.e. the Proposed Acquirer, will attract the provisions of Regulations 4 and 5 of the Takeover Regulations 2011.

(b) Pursuant to the proposed acquisitions, the Proposed Acquirer will indirectly directly hold the same number of shares in the 7 Target Companies as currently indirectly being held by Babasaheb Neelkanth Kalyani, a promoter entity of the Target Companies.

(c) There will be no change in control of the Target Companies 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.

(e) There will also be no change in the public shareholding of the Target Companies.

(f) The Target Companies 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) The objective of the proposed acquisitions is to streamline succession and promote welfare of the members of the Babasaheb Neelkanth Kalyani 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. Babasaheb Kalyani Family Trust, from complying with the requirements of Regulations 4 and 5 of the Takeover Regulations with respect to the proposed acquisitions in the Target Companies (viz. Bharat Forge Limited, BF Utilities Limited, BF Investment Limited, Kalyani Steels Limited, Kalyani Investment Company Limited, Automotive Axles Limited and Hikal Limited), by way of the 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.

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 January 30, 2020 read with e–mails dated March 24, 2020, April 18, 2020, May 04, 2020, May 21, 2020, June 19, 2020, and August 10, 2020 filed on behalf of Babasaheb Kalyani Family Trust, is accordingly disposed of.

PLACE: MUMBAI G. MAHALINGAM DATE: SEPTEMBER 02,2020 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA