Order in the matter of acquisition of shares and voting rights of Refex Refrigerants Limited under Regulation 4(2) of SEBI(Substantial Acquisition of Shares and Takeovers) Regulations, 1997

1. Refex Refrigerants Limited (hereinafter referred to as the target company) is a company incorporated under the Companies Act, 1956, having its registered office at 20, Mooker Nallamuthu Street, Chennai- 600001. The equity shares of the target company are listed on the Bombay Stock Exchange Limited (hereinafter referred to as BSE) and the National Stock Exchange of India Limited (hereinafter referred to as NSE). Mr. T. Anil Jain, promoter and managing director of the target company, vide letter dated July 5, 2010 filed an application with the Securities and Exchange Board of India (hereinafter referred to as SEBI) under Regulation 4 of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the Takeover Regulations) for himself and also on behalf of persons acting in concert with him, namely, Mr. Jagdish Jain, Mr. A. Tarachand Jain, Mrs. Seema Jain, Sherisha Technologies Private Limited and Refex Energy Private Limited (hereinafter collectively referred to as the acquirers). The acquirers form part of the promoter group of the target company. The acquirers had filed the said application in respect of their proposed acquisition of 4,00,000 shares at `200/- each including a premium of `190/-per share, by way of preferential allotment. As per the application, the allotment would be made by way of conversion of existing unsecured loans already extended by the promoters to the target company. It was further stated that due to the proposed transaction, the shareholding of the acquirers would increase from 57.12% to 58.19% of the voting capital of the target company and that of the promoter group (including the acquirers) would increase from 57.65% to 58.71% and hence, the acquirers sought exemption from the applicability of Regulation 11(2) of the Takeover Regulations, inter alia on the following grounds:

i. The target company recorded a turnover of `9059 lakhs with a Profit after Tax of `1202 lakhs for the year ended March 31, 2008 and also rewarded the shareholders with a 20% dividend. However, during the year 2008-09 onwards, the global recessionary trends in the economy coupled with the increasing dollar rates seriously impaired the margins of the target company as most of the products dealt with it are import based and the same reflected in its financial results for the year 2008-09. During the said year, the target company recorded a turnover of `9062 lakhs with a Profit after Tax of `286 lakhs. In the year 2009-10, the target company rerecorded a turnover of `3693 lakhs (unaudited) and a Net Loss of `95 lakhs (unaudited).

ii. During 2008, the target company secured a fund based limits of ` 40.00 crores based on the turnover and Maximum Permissible Bank Finance (MBPF) workings of State Bank of India (SBI). However, due to a fall in turnover, and the compressed margins, during 2008-09, and continuing up to 2009-10, the SBI reworked its MPBF and has stated that due to the falling liquidity, the promoters have to infuse funds into the target company at the earliest in the form of equity by converting the existing unsecured loans given by the promoters group to the target company over a period of time to tide over the liquidity crisis.

iii. SBI has also stated that renewal of such existing fund based limits could depend on the promoters adherence to the said requirement only. Non adherence to the requirement of SBI for infusion of equity by the promoter group may result in the Bank reducing its exposure to the target company thereby further impairing its ability to improve on its performance which may seriously affect the interests of the public shareholders who have invested in the target company.

iv. The alternative route of Follow on Public Offer (FPO) may also not be suitable at this stage considering the time frame involved and current stock market situation.

2. The shareholding pattern of the target company before and after the proposed preferential allotment (as mentioned in the application) is as under:

Shareholders’ Number of registered Before the proposed acquisition After the proposed acquisition category shareholders as on date of application Number of % of Number of % of shares/total shares/total shares/voting shares/voting voting rights voting capital rights rights held held Promoter group 2 83200 0.53 83200 0.52 (A) (other than acquirer and PAC) Acquirers and 5 8838072 57.12 9238072 58.19 PAC (B) (Part of Promoter Group) TOTAL 7 8921272 57.65 9321272 58.71 PROMOTER HOLDING (A+B) FIs/Banks -- -- -- -- -- FIIs/NRIs/OCBs 29 25746 0.16 25746 0.17 Public 5917 6528158 42.19 6528158 41.12 Total 5953 15475176 100.00 15875176 100.00

3. Subsequently, the aforesaid application was forwarded by SEBI to the Takeover Panel in terms of Regulation 4(4) of the Takeover Regulations. The Takeover Panel, vide report dated August 12, 2010, inter alia, observed:

“…….It is evident from the above that the financial condition of the Target Company is fairly good. The panel did not find any justification for granting exemption to the acquirers from the applicability of regulation 11(2) of SAST Regulations and accordingly recommended the rejection of the same.”

4. The report of the Takeover Panel was forwarded to the acquirers by SEBI on August 25, 2010. Further, an opportunity of hearing was also granted to the acquirers on September 8, 2010. Mr. T. Anil Jain, vide letter dated September 4, 2010 informed SEBI that “…..I wish to state you may treat the grounds furnished by me for seeking exemption from making an open offer as final and conclusive as I do not propose to offer any further submission or representation in the matter. Accordingly I am not attending the personal hearing fixed on 8th September 2010”

5. In view of the above submission, I proceed to consider the application dated July 5, 2010 on the basis of the available material on record. It is the submission that SBI has stipulated that the promoters shall infuse funds into the target company at the earliest in the form of equity by converting the existing unsecured loans given by the promoters group to the target company over a period of time to tide over the liquidity crisis. The acquirers also enclosed a copy of the letter of SBI (Commercial Branch, Chennai) dated June 30, 2010 with the present application. One of the stipulations specified in the said letter was “The promoters should infuse equity into the Company at the earliest by conversion of existing promoter loans to the company and/or by bringing in fresh equity atleast to the tune of Rs. 1000 Lakhs to strengthen the gearing ratio”

6. The acquirers have submitted that the proposed allotment would be made against the existing unsecured loans already extended by the promoters to the target company. Pursuant to the said acquisition, the shareholding of the acquirers would increase from 57.12 to 58.19% of the voting capital of the target company. Consequentially, the voting capital of the promoter group (including the acquirers) would increase from 57.65% to 58.71%. I also note that there would not be any change in control pursuant to the proposed acquisition, as the acquirers form part of the promoter group which is already in control of the target company. I further note that the proposed acquisition of shares by the acquirers is pursuant to the stipulation of SBI to the promoters (acquirers) group to infuse funds in the target company. In this regard, the acquirers have submitted in the application that the proposed acquisition would enable the target company to revive its financial position and ensure that the present bank finance limits continue without any disruption and that it would improve the gearing ratio in tune with the bank’s requirements. With regard to the allotment price, I note from the application that, the promoter group intends to infuse confidence in the minds of the public shareholders by investing at such price (including the premium) as against the market price as they are confident that with the recessionary trends receding and the target company recording substantial turnover during April-June 2010, the target company’s performance is bound to improve over the coming months and that the investors interest is fully protected. The increase in the shareholding of the promoters (including the acquirers), post-acquisition is only 1.06%. I also note that even after the proposed acquisition, the public shareholding in the target company would remain above 25%, the level required for continuous listing in terms of the Listing Agreement. Having considered the application, I am of the view that the proposed acquisition by the acquirers is in the interest of the target company and its public shareholders. Therefore, I find the present case a fit one to grant exemption from the applicability of Regulation 11(2) of the Takeover Regulations and I do so accordingly.

7. In view of the foregoing, I, in exercise of powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 read with Regulation 4(6) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, hereby grant exemption to the acquirers, namely, Mr. T. Anil Jain, Mr. Jagdish Jain, Mr. A. Tarachand Jain, Mrs. Seema Jain, Sherisha Technologies Private Limited and Refex Energy Private Limited, in respect of their proposed acquisition of 4,00,000 equity shares of the target company namely, Refex Refrigerants Limited of `10/- each at a price of ` 200/-per share (including a premium of `190/-per share), from the applicability of Regulation 11(2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.

8. The exemption so granted is subject to the following conditions:

(a) The statements/averments made/facts or figures given in the application are true and correct to the best knowledge of the acquirers.

(b) The acquirers along with others in the promoter group shall ensure compliance with the statements, disclosures and undertakings made in the application and subsequent correspondence. (c) The proposed acquisition shall be in accordance with the relevant provisions of the Companies Act, 1956, the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009, the Listing Agreement and other applicable laws.

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

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

PLACE: MUMBAI DATE: OCTOBER 15, 2010