Order in respect of BGR Energy Systems Limited

WTM/PS/CFD/40/SEPT/2013 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM : PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under Section 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 requirement of minimum public shareholding by listed companies In respect of BGR Energy Systems 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. BGR Energy Systems Limited (hereinafter referred to as 'the Company') is one such company against whom the interim order was passed. The shares of the Company are listed on the Bombay Stock Exchange Limited ('BSE').

3. The Company vide its letter dated June 19, 2013 and July 11, 2013 filed its reply to the interim order. Thereafter, an opportunity of personal hearing was afforded to the Company on August 07, 2013, when Mr. R. Ramesh Kumar, President - Corporate & Secretary and Mr. K.S. Raghu, DGM appeared and made submissions. The Company also submitted the written submissions dated August 07, 2013.

4. I have considered the reply of the Company, the letters submitted, the submissions made in the personal hearing and the written submissions. The company has submitted that during the last two years' the capital goods sector/ power sector companies had suffered significantly in market capitalisation due to macro level policy bottlenecks/ constraints and poor visibility of investments in the sector reflected in dismal order pipeline for the sector and company. It has been submitted by the Company that in order to comply with the MPS norms, it had opted to divest 44,22,830 equity shares constituting 6.13% of the share capital of the Company through an Offer for Sale ('OFS') on June 03, 2013. It received the bids for 35,91,759 equity shares. However, it was able to sell only 22,47,466 equity shares and the promoter group could divest only 3.12% as on June 03, 2013. Consequently, the promoter holding was reduced from 81.13% to 78.01%. In order to meet the MPS requirements, the company went for another OFS for 21,75,364 shares on July 05, 2013. Pursuant to the same, the promoters holding was further reduced to 75%, thereby raising the public shareholding to stipulated 25%.

5. It was also submitted that the delay in compliance was due to the circumstances beyond its control. The Company also represented that it is now compliant with the minimum public shareholding norms and requested SEBI to withdraw the directions issued in paragraph 17 of the interim order.

6. The Company has definitely delayed in complying with the MPS requirements under the SCRR, even when it was under notice for three years for achieving compliance. The Company is, therefore, warned for the same and is advised to ensure compliance with all the applicable laws and regulations administered by SEBI that govern its activities in the securities market. Considering the fact that the Company is now compliant with the stipulated minimum public shareholding level, I do not propose to initiate further action against the Company, its directors, promoters and promoter group, as contemplated in paragraph 18 of the interim order.

7. With the above observations, 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 revoke the directions vide the interim order dated June 04, 2013 against the Company, BGR Energy Systems Limited, its directors, promoters and promoter group, with immediate effect.

8. 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.

DATE: September 04th, 2013 PRASHANT SARAN PLACE: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA