Order against Godrej Industries Ltd

1.0 BACKGROUND 1.1 Godrej Industries Limited (hereinafter referred to as the target company) is a company incorporated under the Companies Act, 1956, having its registered office at Pirojshanagar, Eastern Express Highway, Vikhroli (East), Mumbai-400079. The equity shares of the target company are inter alia listed on the National Stock Exchange of India Limited (NSE) and the Bombay Stock Exchange Limited (BSE).

2.0 APPLICATION FOR EXEMPTION 2.1 The target company has filed an application, vide letter dated September 4, 2008 under Regulation 3 (1) (l) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the Takeover Regulations) on behalf of its sixty six promoters including Godrej Agrovet Limited, Goldmohur Foods and Feeds Limited, Godrej Oil Plantations Limited etc. (including promoters, promoter group, directors of the promoters, persons acting in concert) whose details have been annexed in the said application, seeking exemption from the provisions of Regulation 11(2) of the Takeover Regulations. The above mentioned sixty six promoters are hereinafter collectively referred to as the acquirers for the sake of brevity. The target company made the following submissions in the aforesaid application.

2.2 The acquirers of the target company hold 78.57% of the outstanding equity share capital of the target company as on August 29, 2008. The target company proposes to buy back upto 57,00,000 of its own paid-up equity shares for a maximum consideration of upto Rs. 99 crores at a price not exceeding Rs. 275/- per share. In this process, if 57,00,000 equity shares are bought back, the equity shareholding and voting rights of the acquirers would increase from 78.57% to 80%, and a public announcement would have to be made under Regulation 11 (2) of the Takeover Regulations, unless exemption is granted therefrom.

2.3 The exemption is sought, inter alia, on the following grounds:- (a) There will be no change in control as a result of the consequential increase in shareholding and voting rights as the acquirers are already in control of the target company. (b) The buy back offer is being made in accordance with the procedure prescribed by the Companies Act, 1956 and in compliance with the continuous listing requirements laid down in Clause 40A of the Listing Agreement. The target company also passed a Board Resolution dated July 29, 2008 in terms of the provisions of Sections 77A, 77AA and 77B of the Companies Act, 1956 to buy-back its shares, as mentioned above. (c) The increase in shareholding and voting rights of the acquirers from 78.57% to 80% would be incidental to the proposed buy-back offer by the target company. The acquirers do not intend to offer their equity shares to the target company in response to the buy-back offer.

2.4 The shareholding pattern of the target company before and after the proposed buy back offer (as per the application) is as under: Shareholders’ Shareholding Shareholding category

Before the proposed buy back After the proposed Buy Back (as on August 29,2008) Number of Percentage of Number of shares / Percentage of shares shares / total shares / total voting rights / voting rights voting rights voting capital held held Promoters 251234174 78.57% 251234174 80.00% Mutual 1765597 0.49% 62,824,428 20.00% Fund/UTI FIs/Banks 14030140 4.42% Insurance 380719 0.12% companies Foreign 15845556 4.82% Institutional Investors Bodies 9494230 3.33% Corporate Individual 26307362 8.25% shareholders Total 319758602 100.00% 314058602 100.00%

3.0 CONSIDERATION OF THE APPLICATION BY THE TAKEOVER PANEL 3.1 The aforesaid application filed by the target company was forwarded by SEBI to the Takeover Panel in terms of sub-regulation (4) of Regulation 4 of the Takeover Regulations. The Takeover Panel, in its report dated October 6, 2008 observed that:- “…. the buy-back is being proposed in keeping with the target company’s desire to enhance overall shareholders value and even after the buy-back the minimum level of public shareholding of 10% in the Target Company’s case for continuous listing shall be retained. The panel found the proposal to be in the interest of the public shareholders and the Company at large and hence recommended the exemption to the acquirer Godrej Industries Ltd. and the Persons Acting in Concert with it”.

3.2 Thereafter, SEBI granted an opportunity of hearing to the acquirers to make its submission on March 5, 2009. Mr. V Srinivasan, Executive Vice President (Finance & Estate) and Mr Clement Pinto, Associate Vice President (Finance) appeared before me and made submissions on behalf the target company/acquirers. The learned representatives stated before me that the increase in shareholding of the promoters is only incidental to the proposed buy back proposal of the target company. They further stated that there would not be any change in control over the target company pursuant to the buy back, as the promoters are already in control over the target company. They added that pursuant to the proposed buy back and assuming the maximum shares are bought back, the target company would continue to be compliant with the minimum public holding requirement of 10% under Clause 40A of Listing Agreement. Thereafter, the target company, vide letter dated March 9, 2009 (received by SEBI on March 12, 2009) filed written submissions on the above lines.

4.0 FINDINGS

4.1 I have carefully considered the application dated September 4, 2008, the report of the Takeover Panel, oral as well as submissions made on behalf of the target company/acquirers and other materials available on record.

4.2 I observe that though the shareholding and voting rights of the acquirers in the target company would increase from 78.57% to 80% (of the outstanding equity share capital), the number of shares held by them would remain same at 25,12,34,174, even after the buy back of shares by the target company. There is no active acquisition of shares by the acquirers, and the above mentioned increase in shareholding and voting rights of the acquirers is only incidental fallout of the corporate action of buy-back by the target company.

4.3 In the present case, the target company is required to maintain minimum 10% public shareholding in terms of Clause 40A of the Listing Agreement. I note that the minimum public shareholding requirement stipulated in Clause 40A of the Listing Agreement will not be breached by the said increase in shareholding and voting rights of the acquirers pursuant to the proposed buy-back of shares by the target company.

4.4 It is noted that the maximum proposed buy-back price is Rs. 275/- per share while is much greater than the book value of Rs. 31/- per share as on March 31, 2008 (according to the application). In terms of the application filed on behalf of the acquirers, the market price of the shares on BSE and NSE (closing price as on September 02, 2008) was Rs. 169.35/- and Rs. 168.08/-, respectively, which is much lower than the proposed maximum buy-back offer price. 4.5 In view of the above findings I am of the opinion that this is a fit case for grant of exemption under regulation 3 (1) (l) read with regulation 4 of the Takeover Regulations. 5.0 ORDER

5.1 In view of the above findings, I, in exercise of the powers conferred upon me by virtue of section 19 of the Securities and Exchange Board of India Act, 1992 read with sub-regulation (6) of Regulation 4 of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, hereby grant exemption to the acquirers (as mentioned in Annexure (i) to the application dated September 04, 2008) from complying with the provisions of Regulation 11(2) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 with respect to the increase in percentage shareholding and voting rights of the acquirers from 78.57% to 80% in the target company viz. Godrej Industries Limited, pursuant to the proposed buy-back of upto 57,00,000 paid-up equity shares by the said target company.

5.2 The exemption is granted subject to the condition that the acquirers shall ensure compliance with the statements, disclosures and undertakings made in the application and that the proposed buy-back of equity shares shall be in accordance with the Companies Act, 1956, Securities and Exchange Board of India (Buy Back of Securities) Regulations, 1998, the Listing Agreement and other applicable laws.

5.3 This exemption shall not be construed as exemption from requirements of any other provisions of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeover) Regulations, 1997 (e.g. disclosure requirements under Chapter II) or any other law or the Listing Agreement.

K.M.ABRAHAM WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Place: Mumbai Date: March 23, 2009