Exemption Order under Regulation 11 of SEBI (SAST) Regulations, 2011 in the matter of Lux Industries Limited

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 LUX INDUSTRIES LIMITED ACQUIRERS 1. ASHOK TODI FAMILY TRUST 2. ASHOK BIMLA TODI FAMILY TRUST 3. PRADIP TODI FAMILY TRUST 4. PRADIP SHOBHA TODI FAMILY TRUST

BACKGROUND –

1. Lux Industries Limited (“Target Company”) was incorporated under the Companies Act, 1956 on July 21, 1995. The Registered Office of the Target Company is at 39, Kali Krishna Tagore Street, Kolkata – 700 007. The shares of the Target Company are listed on BSE Limited (“BSE”) and National Stock Exchange of India Limited (“NSE”).

2. An Application dated July 24, 2019 (“Application”) read with letter dated September 18, 2019 and emails dated October 24, 2019, January 03, 2020, January 23, 2020, February 14, 2020 and April 16, 2020, seeking exemption from the applicability of, inter alia, Regulations 3(1) and 4 of the Securities and Exchange Board of India (Substantial Order in the matter of Lux Industries Limited

Acquisition of Shares and Takeovers) Regulations, 2011 (“Takeover Regulations 2011”) in the matter of proposed acquisition of shares and voting rights in the Target Company, was received by SEBI from Ashok Todi Family Trust (“Acquirer Trust 1”), Ashok Bimla Todi Family Trust (“Acquirer Trust 2”), Pradip Todi Family Trust (“Acquirer Trust 3”) and Pradip Shobha Todi Family Trust (“Acquirer Trust 4”) (collectively referred to as “Proposed Acquirers”).

3. Regulation 3(1) 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.

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 March 31, 2019 was as under:

TABLE I – SHAREHOLDING IN THE TARGET COMPANY (SOURCE: APPLICATION) NAME NO. OF % SHARES SHAREHOLDING A. PROMOTER/ PROMOTER GROUP 1. ASHOK KUMAR TODI 37,30,000 14.77 2. BIMLA DEVI TODI 35,05,000 13.88 3. PRADIP KUMAR TODI 44,82,500 17.75 4. SHOBHA DEVI TODI 27,52,500 10.90 5. NEHA TODI 50,000 0.20 6. SHILPA PANKAJKUMAR AGARWAL / 50,000 0.20 SHILPA TODI 7. SAKET TODI 1,36,000 0.54 8. UDIT TODI 1,86,000 0.74 9. PRABHA TODI 37,23,000 14.74 TOTAL PROMOTER HOLDING 1,86,15,000 73.71 B. PUBLIC SHAREHOLDING 66,38,000 26.29 TOTAL 2,52,53,000 100

B. As per the Application, letter dated September 18, 2019 and emails dated October 24, 2019, January 03, 2020, January 23, 2020, February 14, 2020 and April 16, 2020:

i. The Target Company is collectively controlled by (a) Ashok Todi, his wife Bimla Devi Todi, and their three children; (ii) Pradip Todi, his wife Shobha Todi, and their two sons, and (iii) Prabha Todi, and her two sons (collectively referred to as “Family Members”), who collectively hold approximately 73.71% of the total equity share capital of the Target Company. The Family Members form part of the promoter and promoter group of the Target Company.

ii. Ashok Kumar Todi, Bimla Todi, Pradip Kumar Todi and Shobha Todi currently hold 37,30,000 shares, 35,05,000 shares, 44,82,500 shares and 27,52,500 shares respectively in the Target Company.

iii. The Proposed Acquirers are acquiring, by way of settlement/ contribution, equity shares of the Target Company.

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

TABLE II: DETAILS OF ACQUIRER TRUST 1 Settlor Trustees Beneficiaries Relationship Ashok Kumar Todi Bimla Devi Todi Ashok Kumar Todi The Trustees (wife of Ashok Kumar Todi) Bimla Devi Todi and beneficiaries Saket Todi are immediate Saket Todi relatives / lineal (son of Ashok Kumar Todi) descendants of the promoter / settlor.

TABLE III: DETAILS OF ACQUIRER TRUST 2 Settlor Trustees Beneficiaries Relationship Pradip Kumar Todi Ashok Kumar Todi Ashok Kumar Todi The Trustees and (brother of Pradip Kumar Bimla Devi Todi beneficiaries are Todi) Saket Todi immediate Saket Todi relatives / lineal descendants of Ashok Kumar Todi. Settlor is brother of Ashok Kumar Todi.

TABLE IV: DETAILS OF ACQUIRER TRUST 3 Settlor Trustees Beneficiaries Relationship Pradip Kumar Todi Shobha Devi Todi Pradip Kumar Todi The Trustees and (wife of Pradip Kumar Shobha Devi Todi beneficiaries are Todi) Udit Todi immediate relatives Udit Todi (son of Pradip / lineal descendants Kumar Todi) Further, Keshav of the promoter Further, Keshav Todi Todi shall /settlor. shall automatically be automatically be added as Trustee on added on attaining attaining majority. majority.

TABLE V: DETAILS OF ACQUIRER TRUST 4 Settlor Trustees Beneficiaries Relationship Ashok Kumar Todi Pradip Kumar Todi Pradip Kumar Todi The Trustees and (brother of Ashok Kumar Shobha Devi Todi beneficiaries are Todi) Udit Todi immediate relatives Udit Todi Further, Keshav / lineal descendants Further, Keshav Todi Todi shall of Pradip Kumar shall automatically be automatically be Todi. Settlor is added as Trustee on added on attaining brother of Pradip attaining majority majority Kumar Todi.

D. The proposed acquisition involves:

i. Settlement / contribution of equity shares of the Target Company to the Proposed Acquirers by Ashok Todi, Bimla Todi, Pradip Todi and Shobha Todi (collectively “selling family members”) as mentioned below (“Acquisition”):

TABLE VI – PROPOSED TRANSACTION (SOURCE: APPLICATION) Sr. No. Transferor Proposed No. of % of total Acquirer shares share capital 1 Ashok Kumar Todi Acquirer Trust 1 30,00,000 11.88 2 Bimla Devi Todi Acquirer Trust 2 30,00,000 11.88 3 Pradip Kumar Todi Acquirer Trust 3 40,00,000 15.84 4 Shobha Devi Todi Acquirer Trust 4 20,00,000 7.92 Total 1,20,00,000 47.52 ii. The proposed transactions are to be undertaken by way of settlement / contribution to the Proposed Acquirers and no monetary consideration would be involved.

iii. Thereafter, the Trustees (on behalf of the respective Acquirer Trusts) will hold 47.52% of the equity share capital in the Target Company. The shareholding in the Target Company subsequent to the proposed Acquisition will be as under:

TABLE VII – PROPOSED SHAREHOLDING IN THE TARGET COMPANY (SOURCE: APPLICATION) NAME NO. OF SHARES % SHAREHOLDING A. PROMOTER/ PROMOTER GROUP 1. ACQUIRER TRUST 1 30,00,000 11.88 2. ACQUIRER TRUST 2 30,00,000 11.88 3. ACQUIRER TRUST 3 40,00,000 15.84 4. ACQUIRER TRUST 4 20,00,000 7.92 5. ASHOK KUMAR TODI 7,30,000 2.89 6. BIMLA DEVI TODI 5,05,000 2.00 7. PRADIP KUMAR TODI 4,82,500 1.91 8. SHOBHA DEVI TODI 7,52,500 2.98 9. NEHA TODI 50,000 0.20 10. SH ILPA PANKAJKUMAR 50,000 0.20 AGARWAL / SHILPA TODI 11. SA KET TODI 1,36,000 0.54 12. U DIT TODI 1,86,000 0.74 13. PR ABHA TODI 37,23,000 14.74 TOTAL PROMOTER HOLDING 1,86,15,000 73.71 B. PUBLIC SHAREHOLDING 66,38,000 26.29 TOTAL 2,52,53,000 100

E. Grounds for seeking exemption – i. The proposed acquisition is intended to streamline succession and welfare of the family members and their lineal descendants, being members of the promoter group of the Target Company.

ii. Post the proposed transactions, the trustees of the Family Trusts would be the legal owners of 47.52% of the total equity share capital of the Target Company. The trustees of the Family Trusts shall be holding the said equity shares of the Target Company for the benefit of the beneficiaries of the Family Trusts. The trustees and the beneficiaries of the Family Trusts are promoters and members of the promoter group of the Target Company or their lineal descendants. Therefore, the current promoters and promoter group would continue to exercise control over the Target Company even pursuant to the proposed transactions.

iii. The proposed transactions are only in the nature of a transfer of equity shares within the promoters and promoter group of the Target Company, with no change in the overall promoters and promoter group shareholding in the Target Company. Pursuant to the proposed transactions, the promoters and promoter group will continue to hold an aggregate of 73.71% of the total equity share capital of the Target Company and the public shareholders will continue to hold an aggregate of 26.29% of the total equity share capital of the Target Company. The Acquirer Trusts have confirmed that the proposed transactions are non-commercial transactions and therefore will not affect or prejudice the interests of the public shareholders of the Target Company in any manner.

iv. SEBI vide its circular dated December 22, 2017 (“Circular”) has provided a standard format for filing of exemption applications under regulation 11 of the Takeover Regulations in order to ensure uniformity of disclosures in such applications. The Acquirer Trusts have confirmed and submitted that the present application has been prepared in compliance with the said format.

v. Further, certain conditions and undertakings have been specified in the Circular which are to be included in the trust deeds of trusts seeking exemption for their proposed acquisitions under regulation 11 of the Takeover Regulations. The Acquirer Trusts have confirmed and submitted that each of the Family Trusts acquiring equity shares of the Target Company as part of the Proposed Transactions satisfies all these conditions and guidelines.

vi. The proposed transactions would not have any adverse impact on the Target Company 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 Company.

5. The Acquirer Trusts (vide the Application read with letter dated September 18, 2019 and emails dated October 24, 2019, January 03, 2020, January 23, 2020, February 14, 2020 and April 16, 2020) have 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 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.

6. The Acquirer Trusts, vide email dated January 23, 2020 have undertaken to delete the clauses in the trust deeds providing for power to decant income or corpus of the trusts to receiving trusts. Further, vide email dated February 14, 2020, they have undertaken to insert a new clause in the Trust Deeds, inter-alia, providing that in the event of dissolution of the Trusts for any reason, the equity shares of the Target Company, which forms part of the trust property, shall be distributed only to the beneficiaries of the trust or to their legal heirs. The Acquirer Trusts have also undertaken, vide email dated April 16, 2020, to remove the clauses in the Trust Deeds which provided that the Trustees shall exercise their vote subject to the terms and conditions of any written agreement entered into by the shareholders of the Target Company and submitted draft amendment deeds incorporating the aforesaid undertakings.

7. I have also perused the shareholding pattern of the company as on March 31, 2020 and observed that the shareholding of promoters in the company has come down from 73.71% as on March 31, 2019 to 69.51% as on March 31, 2020. However, the said reduction would not affect the proposed acquisition as detailed at Para 4D above.

CONSIDERATION –

8. I have considered the Application submitted by the Acquirer Trusts 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 acquisition of shares and voting rights in the Target Company i.e. Lux Industries Limited. The proposed Acquisition as detailed at paragraph 4D above, which are to be made by the Proposed Acquirers, will attract the provisions of Regulations 3 and 4 of the Takeover Regulations 2011.

B. Pursuant to the proposed acquisition, the Proposed Acquirers will hold an aggregate of 47.52% of the paid up equity capital in the Target Company.

C. The objective of the proposed acquisition is to streamline succession and welfare of the family members and their lineal descendants, being members of the promoter group of the Target Company.

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 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). Further, the Acquirer Trusts have undertaken to execute amendments in the Trust Deeds in this regard (as detailed at Para 6).

9. 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 Acquirers, subject to certain conditions as ordered herein below.

ORDER –

10. 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 2011, hereby grant exemption to the Proposed Acquirers, viz. Ashok Todi Family Trust, Ashok Bimla Todi Family Trust, Pradip Todi Family Trust and Pradip Shobha Todi Family Trust from complying with the requirements of Regulations 3 and 4 of the Takeover Regulations 2011 with respect to the proposed acquisitions in the Target Company, viz. Lux Industries Limited, by way of proposed transactions as mentioned in the Application.

11. 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 Acquirers are true and correct.

iv. The Proposed Acquirers shall ensure compliance with the statements, disclosures and undertakings made in the Application and related correspondences. 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.

12. 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.

13. The Application dated July 24, 2019 and related correspondences, filed by Ashok Todi Family Trust, Ashok Bimla Todi Family Trust, Pradip Todi Family Trust and Pradip Shobha Todi Family Trust are accordingly disposed of.

Place: Mumbai G. MAHALINGAM Date: April 30, 2020 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA