Order in the matter of acquisition of shares of Advani Hotels and Resorts (India) Limited

1. Advani Hotels & Resorts (India) Limited (hereinafter referred to as the target company) is a company incorporated under the Companies Act, 1956, having its registered office at 1009/1010, Dalamal Tower, 211, Nariman Point, Mumbai–400021. The equity shares of the target company are listed on the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited. Delta Hospitality and Leisure Private Limited, formerly PLL Delta Hotels Private Limited (hereinafter referred to as the acquirer), vide letter dated June 18, 2010 filed an application with the Securities and Exchange Board of India (hereinafter referred to as SEBI) under Regulation 4(2) read with Regulation 3(1)(l) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the Takeover Regulations). The said application is filed with respect to the proposed acquisition of 16,127,706 equity shares (34.89% of the paid up capital) and voting rights in the target company from the Delta Corp Limited (hereinafter referred to as the transferor) by the acquirer @ `39/- per share. It is stated in the application that the acquirer is a 97% subsidiary of the transferor and the remaining 3% is held by Delta Cruises and Entertainment Private Limited, which in turn is a 100% subsidiary of the transferor. The proposed transfer of 34.89% of the equity share capital from the transferor to the acquirer would increase the shareholding of the acquirer from 0% to 34.89% and that the acquirer would need to make a public announcement in accordance with Regulation 10 of the Takeover Regulations. Accordingly, the acquirer has filed the present application seeking exemption from Regulation 10 of the Takeover Regulations, interalia, on the following grounds:

(a) The transferor indirectly holds 100% control of acquirer. (b) The proposed transfer of 34.89% shareholding in the target company from the transferor to the acquirer is a result of business restructuring. (c) There would be no change in the public shareholding of the target company as a result of the proposed acquisition and the overall shareholding of the promoter group of the target company would also not change. (d) As a result of the proposed acquisition, there would not be any adverse effect on the shareholders of the target company.

2. The shareholding pattern of the target company before and after the proposed acquisition, as per the aforesaid application, is as under:-

Category Before the proposed acquisition After the proposed acquisition No. of shares % No. of shares % Promoter Group 2,29,91,579 49.74 2,29,91,579 49.74 Public (Total) 2,32,27,671 50.26 2,32,27,671 50.26 Transferor 1,61,27,706 34.89 - Transferee - - 1,61,27,706 34.89 (acquirer) TOTAL 4,62,19,250 100 4,62,19,250 100

3. Subsequently, the acquirer, vide letter dated August 31, 2010 informed SEBI that it was not holding any instrument which could impact the share capital or shareholding pattern of the target company. Thereafter, the acquirer, vide letters dated October 4, 2010, October 17, 2010 and October 22, 2010 filed information with SEBI including that of the balance sheets of the target company and the acquirer and the Annual Reports of the acquirer and the transferor. Thereafter the Takeover Panel, vide report dated October 30, 2010 made the following recommendation:

“…….. SAST provides for automatic exemption under regulation 3 to the inter se transfer of shares amongst group companies, relatives and promoters subject to compliance of certain conditions stipulated therein. In other words, even the automatic exemption is linked to certain conditions precedent. In the instant case, the seller and acquirer do not fall within the ambit of group companies of the Target Company or the promoters. Hence, transfer of shares between the holding company and the subsidiary company is between two legal entities. The plea that there would be no change in public shareholding of the Target Company or the transaction would not have any adverse effect on the shareholders of the Target Company, does not provide sufficient ground for grant of exemption. Panel therefore did not recommend any exemption to the acquirer. The Panel had also observed “Incidentally, it may also be mentioned that while going through the records, panel noticed that the applicant (PDHPL) has stated on page 2 of the application that DCL (Holding Company) is holding 97% of equity shares in the applicant company. From the Balance Sheet of DCL as at 31.3.2010 panel did not find any such investment in the PDHPL.”

4. Thereafter, SEBI has sought clarification from the acquirer in respect of the aforesaid observation of the Panel. In reply, the acquirer vide letter dated December 15, 2010 informed the following:

a. The transferor (DCL) acquired 100 % of the share capital of the acquirer on April 30, 2010 and subsequently transferred 3 % of its holding to another of its wholly owned subsidiary- Delta Leisure and Entertainment Private Limited (formerly known as Delta Cruises and Entertainment Private Limited) on June 17, 2010. b. As the aforesaid acquisition took place after March 31, 2010, the latest annual report (2009-10) of the transferor does not reflect the same as investment. c. Name of the acquirer was changed from PLL Delta Hotels Private Limited to Delta Hospitality and Leisure Private Limited with effect from November 16, 2010. A copy of fresh certificate of incorporation consequent upon change of name was also filed with the said letter. Subsequently, the transferor, vide letter dated December 27, 2010 informed SEBI that it is holding 97 % of the share capital of the acquirer.

5. I have considered the application dated June 18, 2010, the recommendation of the Takeover Panel, additional submissions made by the acquirer/transferor in the matter and other relevant material available on record. I note that the acquirer proposes to acquire 16,127,706 equity shares (constituting 34.89% of the equity share capital) in the target company from the transferor. It is the case of the acquirer that the acquirer is a 97% subsidiary of the transferor and the remaining 3% is being held by Delta Cruises and Entertainment Private Limited, which in turn, is a 100% subsidiary of the transferor. Thus, as per the application, the transferor, directly and indirectly holds 100% control of the acquirer. The proposed transfer of 34.89% shareholding in the target company from the transferor to the acquirer is a result of overall business restructuring. 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 transferor is a public shareholder of the target company. I note that Regulation 3(1)(e)(i) of the Takeover Regulations automatically exempts transfer of shares between group companies if they come within the definition of group as defined in the Monopolies and Restrictive Trade Practices Act, 1969 (since repealed) where persons constituting such group have been shown as group in the last published Annual Report of the target company. However, in the instant case, as observed by the Takeover Panel, the transferor and the acquirer are not group companies of the target company. Consequently, the present case does not fall under Regulation 3(1)(e)(i) of the Takeover Regulations. Accordingly, the present exemption application has been made under Regulation 4 of the Takeover Regulations.

6. One of the concerns raised by the Takeover Panel was that there was nothing in the transferor’s balance sheet (as on March 31, 2010) to show its 97% shareholding in the acquirer. In this regard, I note the submission of the acquirer (vide letter dated December 15, 2010) that the transferor acquired 100% of the share capital of acquirer on April 30, 2010 and subsequently transferred 3% of its holding (in the acquirer) to another of its wholly owned subsidiary on June 17, 2010. It was also stated by the acquirer that as the aforesaid acquisition took place after March 31, 2010, the latest annual report (2009-10) of the transferor does not reflect the same as investment. Thereafter, the transferor, vide letter dated December 27, 2010, also confirmed its acquisition of 97% shareholding in the acquirer. In view of the above, the non-disclosure of the transferor’s shareholding in the acquirer has been suitably clarified. I also note that the acquirer’s name appears as the group and subsidiary company of the transferor, in the Annual Report (2009-10) of the transferor. In view of the foregoing, it cannot be disputed that the transfer proposed is from a holding company (transferor) to its 97% subsidiary company (acquirer). Hence, the proposed transfer is between two companies that fall within the same group. I also note that the transferor, who is a public shareholder in the target company, is not on the board of the target company or in control of the same. Therefore, pursuant to the proposed transfer of shares of the target company from the transferor to the acquirer, there would not be any change in control or the management of the target company. Thus, whosoever is in control of the target company as of today would continue to control and manage the affairs of the target company. Further, the public shareholding in the target company would also not change, as only the holding of the transferors would be transferred to the acquirer and that the proposed transfer would only change the mode of ownership of such shares in the target company. It is stated in the application that there would not be any adverse effect on the shareholders of the target company. In view of the reasons stated above, I consider the present case a fit one for granting exemption from the applicability of Regulation 10 of the Takeover Regulations.

7. In view of the above findings, I, in exercise of the 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 Delta Hospitality and Leisure Private Limited (formerly known as PLL Delta Hotels Private Limited), from complying with Regulation 10 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, with regard to its proposed acquisition of 1,61,27,706 (34.89 %) shares and voting rights in Advani Hotels & Resorts (India) Limited, from Delta Corp Limited, at a price of @ `39/- per share.

8. The above exemption is subject to the following conditions:

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

(b) Acquirer shall ensure compliance with the statements, disclosures and undertakings made in the application and the subsequent letters.

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

10. The acquirer shall complete the proposed acquisition within thirty days from the date of this Order and file a report with the Securities and Exchange Board of India within twenty one days thereafter, confirming compliance including conditions specified in this Order.

DR. K. M. ABRAHAM WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA PLACE: MUMBAI DATE: FEBRUARY 10, 2011