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

1. Religare Enterprises Limited (hereinafter referred to as the target company) is a company incorporated under the Companies Act, 1956, having its registered office at D3, P3B, District Centre, Saket, New Delhi-110017. The shares of the target company are listed on the National Stock Exchange of India Limited and the Bombay Stock Exchange Limited. An application dated March 31, 2010 was filed by Logos Holding Company Private Limited (hereinafter referred to as the acquirer) under Regulation 4(2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the Takeover Regulations) read with Regulation 3(1)(l) thereof, with the Securities and Exchange Board of India (hereinafter referred to as SEBI) seeking exemption from the applicability of Regulation 10 of the Takeover Regulations in respect of its acquisition of 19.53% of the paid up equity capital of the target company. According to the aforesaid application, the acquirer is a closely held company belonging to the “Dhillon family” consisting of Mr. Gurinder Singh Dhillon, Mrs. Shabnam Dhillon, M/s. Gurinder Singh Dhillon (HUF), Mr. Gurpreet Singh Dhillon, Mrs. Nayantara Dhillon and Mr. Gurkirat Singh Dhillon and was formed with a view to organize and consolidate the holdings of the individual members of the Dhillon family scattered in various listed and unlisted companies into one company. It was further stated that Mr. Gurinder Singh Dhillon, Mr. Gurpreet Singh Dhillon, Mrs. Nayantara Dhillon and Mr. Gurkirat Singh Dhillon are together holding 19.53% of the paid up equity share capital of the target company, as given below:

S. No. Name of the shareholder % shareholding 1 Mr. Gurinder Singh Dhillon 0.05 2 Mr. Gurpreet Singh Dhillon 9.73 3 Mrs. Nayantara Dhillon 0.02 4 Mr. Gurkirat Singh Dhillon 9.73 Total 19.53

The application has also stated that the shareholding of the aforesaid persons in the target company is shown as part of “public shareholding”. The shares held by the aforesaid persons (who are hereinafter collectively referred to as the proposed transferors) are proposed to be transferred to the acquirer, which is stated to be the investment arm of the Dhillon family, in order to consolidate the individual shareholding of the proposed transferors in the target company, for operational convenience. According to the application, the proposed transfer of 19.53% of the paid up equity share capital from the proposed transferors to the acquirer would increase the shareholding of the acquirer from 0% to 19.53% and that the acquirer would need to make a public announcement in accordance with Regulation 10 of the Takeover Regulations. Therefore, the application was filed seeking exemption from the applicability of the said provision on the following grounds:

i. The ownership of 19.53% of the paid up equity share capital of the target company, post the proposed transfer in favour of the acquirer would effectively continue to remain with the proposed transferors, as the acquirer is fully owned, controlled and managed by the proposed transferors along with their other family members. Post the transfer, the shareholding of the acquirer would continue to be part of the public shareholding in the target company.

ii. As a result of the proposed transfer, there would be no change in control of the target company as the existing promoters would continue to exercise control over the target company.

iii. The sole objective behind the proposed transfer is to streamline the scattered holdings held by the individual members of the Dhillon family into one investment vehicle for operational convenience and that the intention behind the proposed transfer is neither to acquire substantial shares nor control over the target company.

iv. The proposed acquisition would not be detrimental in any manner to the interest of either the target company or its shareholders, including the public shareholders.

v. The proposed acquisition is incidental to the internal arrangement of shareholding by the proposed transferors and is not a pro-active acquisition by the acquirer.

A certified true copy of the resolution passed at the meeting of the board of the acquirer on March 2, 2010, consenting to the acquirer investing in 2,49,61,860 equity shares of the target company at prevailing market price in one or more tranches by way of acquisition/transfer, was also enclosed with the said application. Thereafter, SEBI vide letter dated May 28, 2010 required the acquirer to furnish certain details including the pricing details as per Regulation 20(4) and/or Regulation 20(5) of the Takeover Regulations, the complete details of the acquisition of shares by the proposed transferors in the target company, details of the promoters of the target company as per the initial public offer etc. The said details were submitted by the acquirer, vide letter dated June 4, 2010.

2. In the meanwhile, the said application of the acquirer was forwarded to the Takeover Panel, in terms of Regulation 4(4) of the Takeover Regulations. The Takeover Panel, vide a report dated June 7, 2010 had advised SEBI to procure certain essential information and to place thereafter the case before them for further consideration. Subsequently, SEBI vide an electronic mail advised the acquirer to submit certain details including the latest audited/certified financial statements of the target company as on March 31,

2010, details of source of funds for the proposed acquisition, the latest capital position of the acquirer etc. In response, the acquirer, vide letter dated June 10, 2010 had furnished the information.

3. Subsequently, the Takeover Panel considered the matter and in its Report dated July 21, 2010 while not recommending exemption as sought by the acquirer, had observed as follows:

“The panel observed that transfer of shares by Dhillon family members to the proposed investment company, which is a legal person in the eyes of law, is a transfer between two persons. Even if the proposed investment company is considered as a promoter, the transaction in question will not satisfy the conditions for availing the exemption under the SAST Regulations. The Panel did not find any merit in the proposal and hence did not recommend exemption to the acquirers from the compliance of regulation 10 of the SAST Regulations.” 4. Thereafter, SEBI afforded an opportunity of hearing to the acquirer on August 31, 2010, in terms of Regulation 4(6) of the Takeover Regulations, after considering the Report of the Takeover Panel and other attending facts and circumstances of the case. The acquirer was accordingly informed, vide SEBI letter dated August 12, 2010, which enclosed a copy of the Report of the Takeover Panel. The said hearing was rescheduled to September 1, 2010 and was again rescheduled to September 8, 2010 on the request of the acquirer. In the meanwhile, the acquirer made further submissions, vide letter dated August 31, 2010. On September 8, 2010, the acquirer was represented by Mr. Vinay Chauhan, Advocate, who made submissions. Ms. Rani from the acquirer was also present. During the hearing, the acquirer was also granted liberty to file written submissions. Thereafter, the acquirer submitted its written submissions, vide letter dated September 13, 2010. As certain annexures mentioned in the written submissions were not enclosed as stated therein, SEBI advised the acquirer telephonically as well as vide an electronic mail, to submit the same. The acquirer, vide letter dated September 24, 2010 submitted the said annexures.

5. I have considered the application dated March 31, 2010, the recommendation of the Takeover Panel, the oral as well as written submissions made on behalf of the acquirer and other relevant material available on record. The proposed acquisition of 2,49,61,860 equity shares of the target company (constituting 19.53% of the paid up equity capital) by the acquirer would be through transfer of the holdings of the proposed transferors (belonging to the Dhillon family) in the target company at the prevailing market price. The reason stated by the acquirer for the said transfer was that the said family is interested in consolidating their holding in various listed and unlisted companies with a single entity and that the acquirer was established as an investment vehicle for the said purpose. The aforesaid acquisition by the acquirer would attract Regulation 10 of the Takeover Regulations and therefore a public announcement in terms of the said regulation is mandated under the Takeover Regulations. Admittedly, the proposed transferors are the shareholders of the target company in the “public” category. In this regard, I note from the shareholding pattern of the target company as it appears in the website of the Bombay Stock Exchange Limited, for the quarter ending September 2010, that under the head “Shareholding belonging to the category ‘Public’ and holding more than 1% of the total no. of shares”, Mr. Gurpreet Singh Dhillon and Mr. Gurkirat Singh Dhillon (two of the proposed transferors) are shown as holding 9.31% each in the target company. The total public shareholding in the target company as per the said document is 35.26%. Further, the transfer is proposed to be made by the proposed transferors who are public shareholders in the target company to a corporate entity promoted and controlled by them along with their family members. It is also noted that the acquirer, vide written submission dated September 13, 2010 submitted that the proposed transferors belong to the same family and are “relatives” under Section 6 of the Companies Act, 1956. Further, it is also submitted that they have disclosed themselves as “persons acting in concert” in so far as the target company was concerned. I have perused the disclosures made under Regulations 7(1A) and 7(3) of the Takeover

Regulations. In the disclosures made under Regulation 7(1A), vide letters dated February 26, 2010, pursuant to the allotment of shares in the rights issue, the proposed transferors are shown as “acquirer and persons acting in concert”. Further, in the disclosures filed by the target company under Regulation 7(3) pursuant to the rights issue (date of intimation of allotment as per the disclosure was February 26, 2010), the proposed transferors are shown as acquirer/persons acting in concert. Thus, from the above, it is clear that the transferors are the family members and “persons acting in concert” and are shareholders of the target company in the “public” category.

6. It has also been submitted that the proposed transferors are holding the shares of the target company for a very long time and that prior to the initial public offer of the target company in November 2007, they were holding 18.34% shares. Pursuant to marginal acquisitions as well as the allotment in the rights issue of the target company, the shareholding of the proposed transferors increased to the present holding of 19.53%. The said collective holding is proposed to be transferred to the acquirer. The acquirer, according to the application, has been established as an investment vehicle for the purposes of organising and consolidating the holdings of the individual members of the Dhillon Family scattered in various listed and unlisted companies. According to the application, Mr. Gurinder Singh Dhillon, Mrs. Shabnam Dhillon, M/s. Gurinder Singh Dhillon (HUF), Mr. Gurpreet Singh Dhillon, Mrs. Nayantara Dhillon and Mr. Gurkirat Singh Dhillon (the members of the Dhillon Family) are holding 100% share capital in the acquirer. In the further submissions dated August 31, 2010 of the acquirer, it is stated that pursuant to the proposed transfer, the shareholding of the acquirer (19.53%) would continue to be part of the public shareholding of the target company. I also note that none of the proposed transferors, who are public shareholders in the target company, are on the board of the target company or in control of the same. Therefore, pursuant to the proposed transfer of shares from the proposed transferors to the acquirer, I note that there would be no change in the control or the management of the target company. Whosoever is in control as of today would continue to be in control of the target company and manage its affairs. Further, the percentage of public shareholding in the target company would also not change as only the holding of the proposed transferors would be transferred to the acquirer for consideration. The level of public shareholding would continue to remain the same.

7. During the course of hearing, the counsel representing the acquirer had submitted that in the past, SEBI, vide an Order dated December 22, 2002, had granted exemption to the applicant therein, under Regulation 4 of the Takeover Regulations. According to the counsel, the facts and circumstances of the case on which the aforesaid Order was passed were similar to the present case. The counsel further submitted that the applicant in the said case, Mr. Brij Mohan Thapar had inter alia transferred 28.96% of the voting rights in Crompton Greaves Limited to certain corporate entities wherein the applicant had joint control with other persons acting in concert and that SEBI had inter alia granted exemption on the basis that there was no change in the management or control and that the proposed transfer would not affect the interests of the minority shareholders. I have perused the Order dated December 22, 2002. In the said Order, it is mentioned that the applicant proposed to transfer 28.96% of the voting rights in a company to two corporate entities, which are managed and controlled by the applicant.

In the aforesaid Order, referring to its earlier Order dated October 8, 2001 in the subject matter, SEBI observed “….The transferor companies (other than the common companies shall transfer the shares ultimately in favour of the persons acting in concert which are directly or indirectly owned/controlled by the Thapar brothers……..”. The facts of the said case are similar to that of the case at hand. The Takeover Panel had observed that the proposed transfer of shares of the target company by the Dhillon family members to the proposed investment company (the acquirer) is between two persons. However, when the corporate veil of the acquirer is removed, one finds only the proposed transferors along with their family members as its shareholders. The members of the Dhillon family are holding 100% equity in the acquirer. Instead of holding shares in their individual capacity, the said persons have now thought fit in holding them in a corporate entity, wholly owned, managed and controlled by them. It is also to be borne in mind that the proposed transferors have disclosed, in their disclosures, that they are acting in concert.

Therefore, even if they do not transfer shares to the acquirer, they would continue to exercise their rights in the target company as a group and act in tandem with each other. In these circumstances, I do not find any cause or concern as far as the public shareholders in the target company are concerned. Moreover, it is stated that the transfer would be made for a consideration at the prevailing market price. The Takeover Panel has also observed that even if the acquirer is considered as a promoter, the transaction in question would not satisfy the conditions for availing the exemption under the Takeover Regulations. In this regard, it is contended that neither the proposed transferors nor the acquirer are the promoters of the target company and that the exemption application was filed with SEBI since the proposed transfer did not fall in any of the exempted categories under the Takeover Regulations. Admittedly, the proposed transferors and the acquirer are not promoter entities nor are in the promoter category of the target company. The proposed transferors are shareholders in the target company under the “public” category.

Further, it is not a case that the shares are being transferred to an outsider who comes into the shareholding list of the target company. The individual holding of the proposed transferors are transferred to an entity which had been incorporated and managed by them for the purposes of consolidating their holding. The proposed transfer only changes the mode of ownership of such shares in the target company. Therefore, for the said reasons, I am not in agreement with the observations of the Takeover Panel.

8. At the cost of repetition, I note that, there would be no change in the management or control in the target company, pursuant to the proposed transfer. The proposed transferors are public shareholders in the target company and post transfer, the acquirer would also be shown as a public shareholder, as undertaken by the acquirer. The total shareholding of the public in the target company would also not change. The acquirer, a private limited company, is wholly owned and managed by the transferors along with their family members. No outsider is a stakeholder in the acquirer other than the members of the Dhillon family. SEBI had earlier, vide an Order dated December 22, 2002, had granted exemption to the applicant therein, where the facts and circumstances of the said case are similar to the present one. In view of the reasons stated above and in the preceeding paragraphs, I am of the considered view that the acquirer would be eligible for an exemption under Regulation 4 of the Takeover Regulations in respect of its acquisition of 19.53% of the paid up equity capital of the target company by way of transfer from the proposed transferors.

9. 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 acquirer, Logos Holding Company Private Limited, from the applicability of Regulation 10 of the said Regulations, in respect of its acquisition of 2,49,61,860 equity shares (constituting 19.53% of the paid up equity capital) of the target company, Religare Enterprises Limited, by way of transfer of shares of the said target company by Mr. Gurinder Singh Dhillon, Mr. Gurpreet Singh Dhillon, Mrs. Nayantara Dhillon and Mr. Gurkirat Singh Dhillon, at the prevailing market price.

10. The acquirer shall complete the proposed acquisition within thirty days from the date of passing of this Order and thereafter file a report on the same with the Securities and Exchange Board of India within fifteen days.

11. The exemption is granted subject to the following conditions:

a. The statements/averments made and the facts and figures given in the application and in the subsequent correspondence are true and correct to the best of knowledge of the acquirer. b. The acquirer and its promoters (members of the Dhillon family) shall ensure compliance with the statements, disclosures and undertaking made in the application and in their subsequent submissions/correspondence.

12. The exemption, so granted, shall not be construed as exemption from the requirements of any other provision of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (e.g. disclosure requirements under Chapter II thereof), the Listing Agreement or any other law.

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

PLACE: MUMBAI DATE: DECEMBER 7, 2010