Exemption order under Regulation 11 of SEBI (SAST) Regulations, 2011 in the matter of Indian Metals & Ferro Alloys Ltd

WTM/GM/CFD/117/2017–2018 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA, MUMBAI CORAM: G. MAHALINGAM, WHOLE TIME MEMBER 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 INDIAN METALS & FERRO ALLOYS LIMITED.

Background

1.1 Indian Metals & Ferro Alloys Limited (hereinafter referred to as “Target Company”) was incorporated under the Companies Act, 1956, on November 20, 1961. The Registered Office of the Target Company is at IMFA Building, Bhubaneswar, Orissa ,751010. The shares of the Target Company are listed on BSE Limited (“BSE”) and National Stock Exchange of India Limited (“NSE”).

1.2 The Securities and Exchange Board of India (“SEBI”) received an application dated January 06, 2017 (hereinafter referred to as “the Application”) from B Panda Trust (“Acquirer”) (represented by its Trustee – Ms. Paramita Mahapatra) seeking exemption from the applicability of Regulation 3(1) read with Regulation 5(1) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“Takeover Regulations”) in respect of the proposed acquisition and control of the shareholding and voting rights in the Target Company.

1.3 Regulation 3(1) and Regulation 5(1) of the Takeover Regulations state as follows – “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.

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.

Details of the Proposed Acquisition – 1.4 In the aforementioned Application, the following was inter alia stated – i. Mr. Banshidhar Panda and his family comprising of his two sons, Mr. Baijayant Panda and Mr. Subhrakant Panda and two daughters, Ms. Paramita Mahapatra and Ms. Nivedita Ganapathi (collectively referred as “Panda Group”), inter alia, own and/or control, directly or indirectly, the following companies: a. B. Panda and Company Private Limited (“BPCO”); and b. Utkal Manufacturing and Services Limited (“UMSL”)

ii. Panda Group along with BPCO and UMSL and one Shaisah Foundation (a private trust created by Subhrakant Panda) are promoters of the Target Company.

iii. As per the shareholding pattern of the Target Company as on December 31, 2016, the total shareholding of the promoter group is 58.88% i.e. 1,58,83,312 equity shares of the Target Company. Out of the said 58.88% shareholding, Panda Group directly holds 4.80% shareholding of the Target Company and other promoter group company entities namely BPCO and UMSL holds 51.59% and 2.25% respectively.

iv. The proposed transaction is acquisition of 100% shares of BPCO by the Acquirer from the existing shareholders (all family members) by way of gift. The proposed acquisition is a part of succession plans of Dr. Panda and for streamlining the ownership of the Panda Group’s assets and businesses.

v. The Acquirer is a private trust created by the existing promoter Dr. Panda for the welfare of his family. Acquirer – B Panda Trust Settlor Trustees Beneficiaries Mr. Bansidhar Panda Mr. Bansidhar Panda and his Mr. Bansidhar Panda four children Mr. Baijayant Mr. Baijayant Panda and after his demise, his Panda, Mr. Subhrakant legally wedded spouse and his lineal descendant. Panda, Ms. Paramita Mr. Subhrakant Panda and after his demise, his Mahapatra and Ms. Nivedita legally wedded spouse and his lineal descendant. Ganapathi Ms. Paramita Mahapatra and after her demise, her legally wedded spouse and her lineal descendant Ms. Nivedita Ganapathi and after her demise, her legally wedded spouse and her lineal descendant vi. The details of shareholding of BPCO is provided hereunder: Name No. of shares held % of shares held Dr. Bansidhar Panda 19 0.975 Mr. Baijayant Panda 566 29.041 Mr. Subhrakant Panda 566 29.041

Ms. Paramita Mahapatra 565 28.989 Ms. Nivedita Panda 233 11.955 vii. The proposed transaction will result in an indirect transfer of 51.59% shares of the Target Company held by BPCO to the Acquirer and would trigger the open offer obligations under Regulations 3(1) read with 5(1) of the Takeover Regulations.

viii. The Acquirer agrees that the equity shares held by BPCO in the Target Company being under the lock-in, if any at the time of the proposed acquisition, will be subject to the remaining lock-in period as prescribed under the provisions of Regulations 78 and 79 of SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009.

Grounds for seeking exemption – i. The proposed acquisition is being done for succession plan of Dr. Panda and streamlining the Panda Group’s assets and businesses.

ii. The Acquirer is a private trust created by the existing promoter Dr. Panda for the welfare of his family.

iii. The application is necessitated only because the Acquirer is not named as promoter as required under Regulation 10(1)(a)(ii) for general exemption, although the proposed acquisition is inter-se between the PACs and no third party is involved.

iv. There will not be any change in the shareholding of the Target Company because of the proposed indirect acquisition.

v. There will not be any change in control of the Target Company by the said acquisition as all the trustees of the Acquirer are the existing promoters named as such of Target Company.

vi. The indirect acquisition for which exemption is sought is merely an internal restructuring of the assets of the Panda Group and is a non-commercial transaction which will not prejudice the interests/ or rights of the public shareholders and stakeholders of the Target Company in any manner whatsoever.

Observations of the Takeover Panel on the Application made by the Proposed Acquirers –

A. Takeover Panel’s Recommendations –

2.1 The Application was forwarded to the Takeover Panel in terms of the proviso to Regulation 11(5) of the Takeover Regulations. In its meeting held on March 17, 2017, the Takeover Panel, after considering the Application, rejected the request for exemption, stating the following: “The Panel took note of the provisions in the trust deeds and the undertakings given by the Acquirer. In regard to the provision dealing with conversion of the trust to a Guarantee Company pursuant to the change in law, the Panel was of the view that such conversion, as and when happens, would be governed in accordance with the law then applicable and the same need not be provided for in the trust deed. Further, the clause relating to delegation of authority by the Managing trustee to any other trustee or any other person could result in change/ dilution of control and, therefore, the request for exemption cannot be granted. The Panel was further of the view that the Managing Trustee could not limit his liability for acts done by other trustees or any other person to whom the authority has been delegated. In view of these clauses, the Panel was of the view that the exemption could not be granted to the applicant.”

2.2 Thereafter, the legal counsel for the Acquirer vide letter dated September 09, 2017 submitted a copy of the registered Supplementary Trust Deed dated September 06, 2017, which was considered by the Takeover Panel in its meeting held on October 30, 2017. The Panel recommended grant of exemption stating the following: “The Panel took note of the supplementary trust deed submitted by the applicant after modifying/ removing the provisions of the trust deed due to which the panel had recommended not to grant exemption to the said case. Further, the applicant has also incorporated requisite undertakings in the supplementary trust deed. Accordingly, the Panel recommended grant of exemption to the proposed transaction in the matter.

Consideration of the Application and Findings –

3.1 I have considered the Application alongwith further correspondence and submissions made by the Acquirer Trust; the recommendations of the Takeover Panel and other material available on record.

3.2 From the preceding paragraphs, it is noted that – A. The Application submitted is in respect of the proposed acquisition of the shareholding and voting rights in the Target company i.e. Indian Metals & Ferro Alloys Limited

B. The aforesaid acquisition is proposed to be made by B Panda Trust i.e. the Acquirer, to acquire 100% shares of BPCO which holds 51.59% in the Target Company.

C. The proposed acquisition is pursuant to a private family arrangement intended to streamline the ownership of the Panda Group’s assets and businesses.

D. There will be no change in control of the Target Company pursuant to the proposed acquisition.

E. There is no new acquisition of shares by the Promoters Group and the pre-acquisition and post-acquisition shareholding of the Promoter Group in the Target Company will remain the same at 58.88%.

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 Takeover Panel recommended grant of exemption to the proposed Acquirer/Applicant.

Order – 4.1 Considering the aforementioned I, in exercise of the powers conferred upon me under Regulation 11(5) of the Takeover Regulations read with Section 19 of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”), hereby grant exemption to the proposed Acquirer, viz. B Panda Trust (represented by their Trustee – Ms. Paramita Mahapatra), from complying with the requirements of Regulation 3(1) read with 5(1) of the Takeover Regulations with respect to the proposed acquisition/exercise of voting rights in respect of the Target Company, viz. Indian Metals & Ferro Alloys Limited, by way of proposed transactions as mentioned in the Application.

4.2 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 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 by the Acquirers are true and correct. iv. The provisions of the SEBI Act and the Regulations framed thereunder will apply on the basis that the ownership or control of shares or voting rights vests not only directly with the Trustees but also indirectly with the beneficiaries of the Acquirer. v. There shall be no limitation of liability of the Trustees/beneficiaries in relation to the provisions of the SEBI Act and all Regulations framed thereunder. vi. The Acquirer shall honour their undertakings and shall also ensure compliance with the statements, disclosures and undertakings made in the Application and in the subsequent correspondence.

vii. The Acquirer 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 Target Company, which 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. viii. The Acquirer shall get the compliance status certified from an Independent Auditor annually and furnish the same to the stock exchanges with a copy endorsed to SEBI for its records. ix. The liabilities and obligations of the transferor under the SEBI Act and Regulations framed thereunder will not change or get diluted due to transfers to the proposed Acquirer. x. The Acquirer 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.

4.3 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.

4.4 The Application dated January 06, 2017 (read with further correspondence and submissions) filed by B Panda Trust (represented by their Trustee – Ms. Paramita Mahapatra), is accordingly disposed of.

Place: Mumbai G. MAHALINGAM Date: March 28, 2018 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA