Exemption Order under Regulation 11 of SEBI (SAST) Regulations, 2011 in the matter of “SRF LIMITED”

WTM/GM/CFD/51/2019–20 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 INDIRECT ACQUISITION OF SHARES AND VOTING RIGHTS IN – TARGET COMPANY SRF LIMITED ACQUIRER ABR FAMILY TRUST

BACKGROUND –

1. SRF Limited (“Target Company”) was incorporated under the Companies Act, 1956 on January 09, 1970. The Registered Office of the Target Company is at The Galleria, DLF Mayur Vihar, Unit No. 236 & 237, 2nd Floor, Mayur Place, Mayur Vihar Phase I Extension, Delhi – 110 091. The shares of the Target Company are listed on BSE Limited (“BSE”) (Listing date – May 07, 1987) and NSE Limited (“NSE”) (Listing date – August 18, 2003)

2. An Application dated July 05, 2019 (“Application”) read with letters dated August 05, 2019 and November 08, 2019, seeking exemption from the applicability of inter alia Regulations 4 and 5(1) of the Securities and Exchange Board of India (Substantial 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 ABR Family Trust (“Acquirer Trust / Proposed Acquirer”).

3. Regulation 4 and 5(1) of the Takeover Regulations 2011 states as under:

“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

Order in the matter of SRF Limited 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. The shareholding of the Target Company as on March 31, 2019 is as under:

TABLE I – SHAREHOLDING IN THE TARGET COMPANY (SOURCE: APPLICATION) NAME NO. OF SHARES % SHAREHOLDING A. PROMOTER/ PROMOTER GROUP 1. ARUN BHARAT RAM 27,500 0.04 2. KAMA HOLDINGS LIMITED 3,00,49,000 52.28 TOTAL PROMOTER HOLDING 3,00,76,500 52.32 B. PUBLIC SHAREHOLDING 2,74,04,000 47.68 TOTAL 5,74,80,500 100

B. As per the Application dated July 05, 2019 and letters dated August 05, 2019 and November 08, 2019, i. Mr. Arun Bharat Ram (“ABR”), Mr. Ashish Bharat Ram (“AsBR”) and Mr. Kartik Bharat Ram (“KBR”) currently hold 48,39,446 shares (approx. 75%) of face value Rs. 10/- per equity share of the Kama Holdings Ltd. (“KAMA”).

ii. KAMA holds 3,00,49,000 (52.28%) and ABR holds 27,500 (0.04%) equity shares of face value of INR 10/- per equity share of the Target Company, aggregating to 52.32% of the equity share capital of the Target Company. The Target Company is a subsidiary of KAMA.

iii. The members of ABR Family propose to gift / settle their shareholding in KAMA to a private family trust. The ABR Family Trust has been settled by ABR, AsBR and KBR for the ABR Family by a registered trust deed dated March 20, 2019 (“Trust Deed”) read with addendum deed dated August 05, 2019 (“Addendum Deed”) to the Trust Deed and second addendum deed dated November 07, 2019 (“Second Addendum Deed”).

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

ACQUIRER TRUST – ABR FAMILY TRUST SETTLOR TRUSTEES BENEFICIARIES RELATIONSHIP Mr. Arun Bharat Mr. Arun Bharat Ram Members of ABR The Trustees and Ram Family beneficiaries are Mr. Ashish Bharat immediate relatives/lineal Mr. Ashish Bharat Ram descendants of the Ram (son of ABR) Promoter/Settlor (son of ABR) Mr. Kartik Bharat Mr. Kartik Bharat Ram Ram (son of ABR) (son of ABR)

D. The proposed acquisition involves / would result in the following: i. Acquisition of all of the equity shares (i.e. 48,39,446 shares representing 75% of the total shareholding) held by the members of the ABR Family i.e. ABR, AsBR and KBR in KAMA by the Acquirer Trust by way of gift / settlement (“Acquisition”). Thereafter, the Trustees (on behalf of the Acquirer Trust) will hold 75% of the equity share capital in KAMA.

ii. The proposed settlement of KAMA shares by ABR Family to the Acquirer Trust will result in and trigger indirect acquisition of control over the Target Company as envisaged under Regulation 4 and 5 of the Takeover Regulations, 2011.

E. Grounds for seeking exemption – i. The proposed transfer of shares of the KAMA is not to any third party but to the ABR Family Trust, which is a family trust settled and administered by the members of the ABR Family i.e. ABR, AsBR and KBR (“Transferors”) themselves. Members of the ABR Family holding and transferring all the shares of the KAMA as stated above (Transferors) and the members of the ABR Family who are the trustees and beneficiaries of the ABR Family Trust have been declared as promoters to the stock exchanges. ii. The Transferors will subsequently hold the shares as the Trustees of the ABR Family Trust. iii. Pursuant to the proposed transfers, the ABR Family Trust will be considered as part of the promoter group of the KAMA as well as the Target Company. iv. The sole and exclusive beneficiaries of the ABR Family Trust are the Transferors, their spouses and their legal lineal descendants only and no third party is a beneficiary. The beneficiaries of the ABR Family Trust are not entitled to transfer their beneficial ownership interest in the ABR Family Trust property to any third party. Upon demise/ insolvency of a beneficiary, the beneficial ownership interests in the trust property will vest in lineal descendants of the relevant beneficiary. v. The proposed transfer will not alter the board of directors of the Target Company. vi. There is no change of control of the KAMA and the Target Company and the members of the ABR Family (Transferors) will continue to exercise control over the KAMA and Target Company through the ABR Family Trust. vii. The proposed transfer by the Transferors is only an internal reorganization of the shareholding of the Target Company within the Transferors’ families for the purpose of a private family arrangement for the benefit of the members of the ABR Family. It is pertinent to note that the trustees who will exercise control over the assets of the ABF Family Trust and the Transferors, who are the current promoters of the KAMA and the Target Company, are the same set of individuals forming part of the same family. Further, the proposed transfer would not result in any increase / decrease in the holding of the Transferors in the KAMA and the Target

Company as the Transferors would not continue to hold the same shares through the ABR Family Trust, pursuant to the private family arrangement between the Transferors. Consequently, there will be no change in control or management of the KAMA and the Target Company pursuant to the proposed transfers by the Transferors by way of a gift/ settlement in the ABF Family Trust. Such transfer is non-commercial in nature and will not prejudice the interests of the public shareholders of the KAMA and the Target Company in any manner.

5. The Acquirer Trust (vide the Application read with letters dated August 05, 2019 and November 08, 2019) 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. Only individual promoters or their immediate relatives or lineal descendants are Trustees and beneficiaries. iii. 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. iv. In case of dissolution of the 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 of 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 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 the 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 materials available on record. Without reiterating the facts as stated above, the following is noted:

A. The Application submitted is in respect of the proposed indirect acquisitions of shares and voting rights in the Target Company i.e. SRF Limited. The proposed indirect Acquisition as detailed at paragraphs 4D above, which are to be made by ABR Family Trust i.e. the Proposed Acquirer in KAMA, will attract the provisions of Regulations 4 and 5(1) of the Takeover Regulations 2011 over the Target Company.

B. Pursuant to the proposed acquisitions, the Proposed Acquirer will acquire indirect control over SRF Limited consequent to transfer of 75% of the paid up equity capital in the KAMA to the Acquirer Trust. The shareholding of the promoters (KAMA and ABR) in the Target Company would remain the same i.e. 52.32%.

C. The objective of the proposed acquisitions is to streamline the succession of ABR Family and their respective descendants.

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 Acquirer has also confirmed that it is in compliance with the Guidelines outlined in the Schedule to the SEBI Circular dated December 22, 2017 (as reproduced at paragraph 5). The Acquirer Trust has also incorporated the Guidelines in the aforementioned Circular in Clause 8.5, Clause 11.3, Clause 25 and Clause 27 of the Trust Deed read with Amendment Deeds.

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 2011, hereby grant exemption to the Proposed Acquirer, viz. ABR Family Trust, from complying with the requirements of Regulations 4 and 5(1) of the Takeover Regulations 2011 with respect to the proposed indirect acquisition of control in respect of the Target Company i.e. SRF 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 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.

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 dated July 05, 2019 and related correspondences, filed by ABR Family Trust is accordingly disposed of.

Place: Mumbai G. MAHALINGAM Date: December 09, 2019 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA