In respect of Shantivijay Jewels Limited- minimum public shareholding requirement

WTM/PS/29/CFD/AUG/2014 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM: PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under sections 11(1), 11(2)(j), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 read with section 12A of the Securities Contracts (Regulation) Act, 1956 in the matter of non-compliance with the minimum public shareholding requirements In respect of Shantivijay Jewels Limited

1. Securities and Exchange Board of India (hereinafter referred to as 'SEBI') passed an interim order dated June 04, 2013 (hereinafter referred to as 'the interim order') with respect to 105 listed companies who did not comply with the Minimum Public Shareholding ('MPS') norms as stipulated under rules 19(2)(b) and 19A of the Securities Contracts (Regulation) Rules, 1957 (hereinafter referred to as 'SCRR') within the due date i.e., June 03, 2013. The interim order was passed without prejudice to the right of SEBI to take any other action, against the non-compliant companies, their promoters and/ or directors or issuing such directions in accordance with law. The interim order was to be treated as a show cause notice by those companies for action contemplated in paragraph 18 thereof.

2. Shantivijay Jewels Limited (hereinafter referred to as 'the Company') is one such company against whom the interim order was passed. The promoter shareholding in the Company on the date of the interim order was 93.09%. The shares of the Company are listed on the Bombay Stock Exchange Limited ('BSE').

3. The Company filed its replies to the interim order vide letters dated June 20, 2013 and September 25, 2013, wherein the following submissions were inter alia made:

a. The Company had initiated steps towards the compliance of Clause 40A during year 2006 by increasing its authorised share capital in the hope to raise equity by issue of further shares depending on investors perception/ risk appetite from companies involved in the jewellery industry. However, it faced difficulties to get keen interest by the merchant/ investment bankers as they were interested in bigger proposals. The company has paid up capital of ₹3 crores only and its shares are infrequently traded. It was further realized that perception for investment in jewellery industry was quite poor due to highly competitive nature of business and very low margins compared with other sectors.

b. Further, the recession and global capital market meltdown in the year 2008 had adversely impacted its hope of disinvestment as the major exports of the Indian jewellery industry have been to US and European countries. The scenario had not materially improved since then to enable divestment by the Company to be able to comply with the requirement of Clause 40A of the Listing Agreement. c. The Company in order to ensure compliance with the requirement of MPS had examined the various options available. To start with, the promoters and the members of the promoter group had undertaken an Offer for Sale (hereinafter referred to as 'OFS') on May 24, 2013 (Tranche 1), for an aggregate of up to 5,45,000 equity shares at a price of ₹100 each. The response to this was very poor as at the close of the Tranche 1 offer, out of the 5,45,000 equity shares offered only 140 equity shares were subscribed which brought down the shareholding of promoters/ promoter group from 93.10% to 93.09%. d. Thereafter at the meeting of the Board of Directors of the Company on June 12, 2013, it was decided, in principle, to go for voluntary delisting of equity shares of the Company in accordance with the provisions of the SEBI (Delisting of Equity Shares) Regulations, 2009 (the 'Delisting Regulations').

4. Thereafter, an opportunity of personal hearing was afforded to the Company on January 22, 2014, when Mr. Pradeep Godha, the Chairman and Managing Director of the Company and Mr. Anurag Godha, Vice Chairman and Managing Director of the Company appeared along with Ms. Shailashri Bhaskar and Mr. Sunil Dedhia (both from Corporate Law Advisor) and reiterated the submissions made in the reply. The representatives submitted that they are taking possible steps for complying with the MPS requirements. They also sought for another opportunity of personal hearing. The hearing was adjourned and the Company was advised to report the status thereof to SEBI.

5. The Company vide its letter dated February 20, 2014, intimated that after deliberations and advisory from Hem Securities Limited, the Merchant Banker, the promoters of the Company again decided to offer equity shares via stock exchange mechanism as a last attempt to continue with the listing. The promoters namely Mr. Pradeep Kumar Godha, Mr. Anurag Godha and Ms. Rajrani Godha had undertaken OFS on February 13, 2014 (Tranche 2), for an aggregate of up to 5,43,250 equity shares. At the close of the Tranche 2 offer, out of 5,43,250 equity shares offered, only 1,83,100 equity shares were subscribed and the promoters' shareholding reduced to 87% from 93.09%. The Company vide this letter submitted that as its last effort by its promoters to achieve the MPS requirement and remain listed had failed, the promoters have desired for voluntarily delisting of the equity shares of the Company.

It was also submitted that the Board of Directors of the Company on taking cognizance of the same confirmed once again to go for voluntary delisting of equity shares. The Company proposed to initiate the process to obtain approval of shareholders on the receiving approval from SEBI for voluntary delisting. The Company in its communication requested for relaxation of all actions indicated in the interim order to enable the promoter/ promoter group to go ahead with the offer for delisting of equity shares by acquiring remaining public shareholding and for withdrawal/ relaxation of interim order in respect of the independent directors as they had tried their best to contribute their ideas to ensure that the Company becomes MPS compliant.

6. Thereafter, the Company vide letters dated March 27, 2014 and May 09, 2014, submitted that the postal ballot process for seeking approval of the public shareholders of the Company for delisting of shares were dispatched on April 02, 2014 and the scrutinizer vide its report dated May 03, 2014, has reported that the resolution has been approved with the requisite majority as 4,98,374 (equity shares) votes were casted in favour of the resolution and 1,852 (equity shares) votes were casted against the resolution. In view of the submissions, the Company requested SEBI to consider granting permission to its promoters to acquire equity shares of the Company, for the purpose of delisting of its equity shares and also requested necessary extension of time to complete the delisting process.

7. The Company was afforded another opportunity of personal hearing on June 10, 2014 when Mr. Pradeep Godha, the Chairman and Managing Director of the Company and Mr. Anurag Godha, Vice Chairman and Managing Director of the Company appeared along with Ms. Shailashri Bhaskar and Mr. Sunil Dedhia and reiterated the above submissions. During the course of hearing, when the representatives were asked whether the sale of 6.09% shares in the tranche 2 OFS was done so as to achieve easier success in reaching the desired levels in the delisting offer, the representatives sought liberty to submit a proposal.

8. Thereafter, the Company vide its letter dated June 13, 2014, proposed that for the purposes of Regulation 17 of the Delisting Regulations, it would consider the pre-OFS (concluded on February 13, 2014) shareholding of the promoters. The Company while referring to a letter received from a relative of an independent director holding 10,000 equity shares (i.e. 0.33% of the paid up capital of the Company), being part of the public shareholders, jointly with Independent Director whose shares are frozen by virtue of the interim order has requested SEBI to relax the directions in respect of their shares as aforesaid and allow them to take part in the proposed delisting offer, if they may be interested. The Company sought permission to apply to BSE for the grant of 'in-principle' approval for delisting. The Company also requested SEBI to grant atleast a period of five (5) months to complete the delisting process.

9. I have considered the submissions made by the Company vide their replies, oral submissions made during the personal hearings, the proposal for delisting as submitted by the Company and the material available on record. I note that in tranche 1 OFS, the shareholding of the promoters/ promoter group had come down from 93.10% to 93.09%. Thereafter, the Company in its Board of Directors meeting held on June 12, 2013, had decided to go for voluntary delisting of its equity shares. However, the Company in an attempt to achieve the MPS requirement and remain listed had undertaken tranche 2 of OFS on February 13, 2014, whereby, the shareholding of promoters/ promoter group has come down to 87%. Having failed in its attempt to comply with the MPS norms, the Company has desired to delist the shares of the Company from the stock exchange. Considering the fact that the shareholders have approved the proposal for delisting as seen from the scrutinizers report dated May 03, 2014 and the proposal of the Company, I am of the considered view that the Company/ promoters could be allowed to proceed with the delisting process in accordance with the Delisting Regulations and also to suitably relax the directions issued against the Company's promoters to enable them to purchase shares in the delisting offer to be made by them.

10. I note that in terms of Regulation 8(1)(d) of the Delisting Regulations, the final application for delisting should be made within one year of passing of the special resolution of the shareholders approving the delisting proposal. Therefore, I find it reasonable and appropriate to modify the directions issued vide the interim order to the extent that the same does not affect or prejudice the efforts of the Company/ its promoters' from continuing with the voluntary delisting process.

11. In view of the foregoing, I, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 read with Sections 11(1), 11(2)(j), 11(4) and 11B thereof and section 12A of the Securities Contracts (Regulation) Act, 1956, hereby issue the following directions which are in modification of the directions issued vide the interim order dated June 04, 2013 :

(i) The direction issued in paragraph 17(b) of the interim order dated June 04, 2013 stands modified to the extent that it shall not hinder the already commenced voluntary delisting process initiated by the Company, Shantivijay Jewels Limited and the promoters shall be permitted to buy the equity shares from the public shareholders as part of the delisting offer. The Company shall complete the delisting process within a period of five (5) months from the date of this order and shall report the outcome within one (1) months' period from the date of delisting. Further, the directors who are not part of the promoter group and who are restrained inter alia from selling their shares in the Company would be allowed to sell them in the delisting offer. (ii) The direction contained in 17(b) of the interim order dated June 04, 2013 shall be re-imposed/ revived immediately (without the need for passing of a separate order) in case the delisting process of the Company is not successful within the period directed in sub paragraph (i) above. (iii) The directions contained in paragraphs 17(a), (c) and (d) of the interim order dated June 04, 2013 shall continue to be in effect till such time the Company is delisted from the stock exchanges or till the time the Company becomes compliant with the MPS norms, whichever is earlier.

12. This Order shall come into force with immediate effect.

13. The aforesaid directions are issued without prejudice to the right of SEBI to initiate action as contemplated in paragraph 18 of the interim order in case the delisting process of the Company is not successful within the period as directed in paragraph 6(i) above.

14. Copy of this Order shall be served on the stock exchanges and depositories for their information and action that may deem fit and necessary in this case.

PLACE: Mumbai PRASHANT SARAN DATE: August 14, 2014 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA