Order in the matter of Alkem Laboratories Limited.

SEBI/WTM/SR/CFD–DCR/ 17/03/2017 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA, MUMBAI CORAM: S. RAMAN, WHOLE TIME MEMBER ORDER UNDER REGULATION 11(5) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 2011. IN THE MATTER OF PROPOSED ACQUISITION OF SHARES AND VOTING RIGHTS IN ALKEM LABORATORIES LIMITED.

Background –

1.1 Alkem Laboratories Limited (“Target Company”) is a public limited company incorporated under the Companies Act, 1956 (“Companies Act”) on August 8, 1973. The Target Company is engaged in the development, manufacture and sale of pharmaceutical and nutraceutical products. The Registered Office of the Target Company is at Alkem House, Senapati Bapat Marg, Lower Parel, Mumbai–400013. The shares of the Target Company are listed on BSE Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”).

1.2 SEBI received an application dated October 7, 2016 (“Application”) from Samprada & Nanhamati Singh Family Trust (Trustee – Sarvesh Singh) (“Proposed Acquirer”) seeking exemption from the applicability of Regulation 3(1) and 4 of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“Takeover Regulations”) in respect of the proposed acquisition and control of the shareholding and voting rights in the Target Company.

1.3 Regulation 3(1) and Regulation 4 of the Takeover Regulations states – “Substantial acquisition of shares or voting rights. – 3. (1) No acquirer shall acquire shares or voting rights in a target company which taken together with shares or voting rights, if any, held by him and by persons acting in concert with him in such target company, entitle them to exercise twenty-five per cent or more of the voting rights in such target company unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with these regulations.

Acquisition of Control – 4. Irrespective of acquisition or holding of shares or voting rights in a target company, no acquirer shall acquire, directly or indirectly, control over such target company unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with these regulations.”

1.4 In the aforementioned Application, the following was stated – i. “The Promoters of the Target Company and their shareholding as on September 30, 2016, are as follows – Table A Name Shares % A. Promoter Group 1. Samprada Singh 47,30,070 3.96 2. Balmiki Prasad Singh 62,57,355 5.23 3. Manju Singh 13,24,600 1.11 4. Satish Kumar Singh 34,04,204 2.85 5. Premlata Singh 10,12,200 0.85 6. Sarandhar Singh 18,13,800 1.51 7. Srinivas Singh 18,13,800 1.51 8. Sarvesh Singh 17,93,000 1.50 9. Annapurna Singh 15,91,600 1.33 10. Sandeep Singh 17,91,267 1.50 11. Inderjit Kaur Arora 15,99,400 1.34 12. Basudeo N. Singh 84,79,950 7.09 13. Mritunjay Kumar Singh 58,01,060 4.85 14. Dhananjay Kumar Singh 57,66,260 4.82 15. Rekha Singh 34,59,150 2.89 16. Madhurima Singh 29,74,240 2.49 17. Seema Singh 29,37,740 2.46 18. Archana Singh 23,94,050 2.00 19. Meghna Singh 12,02,150 1.01 20. Aniruddha Singh 11,95,650 1.00 21. Divya Singh 11,95,650 1.00 22. Shrey Shree Anant Singh 11,95,650 1.00 23. Samprada Singh HUF 1,50,800 0.13 24. Jayanti Sinha 71,38,220 5.97 25. Nawal Kishore Singh 43,11,060 3.60 26. Lalan Kumar Singh 27,11,538 2.27 27. Madan Kumar Singh 13,87,494 1.16 28. Raj Kumar Singh 5,38,038 0.45 Total Promoter Group 7,99,69,996 66.88 ii. Mr. Samprada Singh, one of the Promoters of the Target Company, has settled the Samprada & Nanhamati Singh Family Trust (“Acquirer”) for the benefit of his family members, being the Transferors and their lineal descendants (“Family” – Entities at serial no. 1 – 11 of Table A).

SAMPRADA & NANHAMATI SINGH FAMILY TRUST Settlor Initial Trustees Beneficiaries Relationship Mr. Samprada Singh At least 4 Samprada Singh There are 3 main family lines, viz. Trustees with one Balmiki Prasad Singh Sandeep Singh Family, Sarandhar Singh Family and representative Manju Singh Sarvesh Singh Family. The Settlor is one of the family from each family Satish Kumar Singh members. The Beneficiaries are family members and line Premlata Singh their lineal descendants. Sarandhar Singh Srinivas Singh Sarvesh Singh Annapurna Singh Sandeep Singh Inderjit Kaur Arora iii. The object of the Acquirer is to establish a sustainable framework for:  Effectively running and governing the business of the Target Company;  Consolidating and preserving the wealth of the Family;  Preserving and providing for the maintenance, income, welfare, expenses and other contingencies of the Family; and  Efficient and flexible succession planning. iv. The trustees of the Acquirer are also the Promoters of the Target Company. v. As on date of this Application, the Acquirer does not hold any shares of the Target Company. However, the Transferors in their capacity as the Promoters of the Target Company, along with other Promoters and members of the Promoter Group of the Target Company together hold 7,99,69,996 issued and paid – up equity shares representing 66.88% of the shareholding of the Target Company.

Proposed Acquisition – vi. Pursuant to Family Settlement Agreement (dated March 23, 2016), the Transferors propose to transfer a total of 21.08% of the shareholding in the Target Company held by the transferors to the Acquirer by way of a gift.

vii. The pre–acquisition and post–acquisition shareholding in the Target Company is as follows – Table B Name Pre – Acquisition Post – Acquisition Shares % Shares % A. Promoter Group 1. Samprada Singh 47,30,070 3.96 15,77,190 1.31 2. Balmiki Prasad Singh 62,57,355 5.23 41,595 0.03 3. Manju Singh 13,24,600 1.11 0 0 4. Satish Kumar Singh 34,04,204 2.85 21,444 0.02 5. Premlata Singh 10,12,200 0.85 0 0 6. Sarandhar Singh 18,13,800 1.51 69,800 0.06 7. Srinivas Singh 18,13,800 1.51 69,800 0.06 8. Sarvesh Singh 17,93,000 1.50 69,800 0.06 9. Annapurna Singh 15,91,600 1.33 0 0 10. Sandeep Singh 17,91,267 1.50 68,067 0.06 11. Inderjit Kaur Arora 15,99,400 1.34 7800 0.01 12. Samprada & Nanhamati Singh Family Trust 0 0 2,52,05,800 21.08 13. Basudeo N. Singh 84,79,950 7.09 84,79,950 7.09 14. Mritunjay Kumar Singh 58,01,060 4.85 58,01,060 4.85 15. Dhananjay Kumar Singh 57,66,260 4.82 57,66,260 4.82 16. Rekha Singh 34,59,150 2.89 34,59,150 2.89 17. Madhurima Singh 29,74,240 2.49 29,74,240 2.49 18. Seema Singh 29,37,740 2.46 29,37,740 2.46 19. Archana Singh 23,94,050 2.00 23,94,050 2.00 20. Meghna Singh 12,02,150 1.01 12,02,150 1.01 21. Aniruddha Singh 11,95,650 1.00 11,95,650 1.00 22. Divya Singh 11,95,650 1.00 11,95,650 1.00 23. Shrey Shree Anant Singh 11,95,650 1.00 11,95,650 1.00 24. Samprada Singh HUF 1,50,800 0.13 1,50,800 0.13 25. Jayanti Sinha 71,38,220 5.97 71,38,220 5.97 26. Nawal Kishore Singh 43,11,060 3.60 43,11,060 3.60 27. Lalan Kumar Singh 27,11,538 2.27 27,11,538 2.27 28. Madan Kumar Singh 13,87,494 1.16 13,87,494 1.16 29. Raj Kumar Singh 5,38,038 0.45 5,38,038 0.45 Total Promoter Group 7,99,69,996 66.88 7,99,69,996 66.88 B. Public 3,95,95,004 33.12 3,95,95,004 33.12 C. Total (A + B) 11,95,65,000 100.00 11,95,65,000 100.00 viii. The Proposed Transfer is with the objective of giving effect to the Family Settlement Agreement entered into by and amongst the Transferors for, inter alia, the following purposes:  To avoid any discord amongst the Transferors and the future generations;  Effectively running and governing the business of the Target Company;  Collectively holding the shares and consolidating the holdings in the Target Company;

 Ensuring that the family stays together and works towards furtherance of their common objective of making the Target Company grow;  Ensuring that the family i.e. the Transferors, exercises its rights over the Target Company in a uniform manner;  Consolidating and preserving wealth of the family;  Facilitating and peaceful and amicable relations between the members of the family; and  Efficient and flexible succession planning.

Details of exemption sought and grounds for seeking exemption – ix. This exemption is sought in relation to the proposed transfer of 2,52,05,800 (21.08% ) equity shares of the Target Company by way of a gift, from the Transferors to the Acquirer under the Family Settlement Agreement. x. Pursuant to the proposed transfer by the Transferors to the Acquirer, the Acquirer alongwith the other Promoters and/or Promoter Group will acquire voting rights and control over the Target Company. After that, the voting rights will be exercised by the Acquirer. Thus, the provisions of Regulation 3 and Regulation 4 of the Takeover Regulations will get triggered necessitating an open offer. xi. … though there would be an instance of triggering of the Takeover Regulations, the ultimate beneficial interest in the shares held by the Acquirer would remain with the Transferors in the same proportion as their shareholding was in the Target Company prior to the transfer to the Acquirer. The Acquirer in essence is only a mirror image of the holdings of the Transferors, except for the miniscule 1.61% of shareholding that has been retained by the following for the purpose of liquidity in case of personal exigencies and contingencies. Table C Name Post – Acquisition Shares % Transferors in the Promoter Group 1. Samprada Singh 15,77,190 1.31 2. Balmiki Prasad Singh 41,595 0.03 3. Manju Singh 0 0 4. Satish Kumar Singh 21,444 0.02 5. Premlata Singh 0 0 6. Sarandhar Singh 69,800 0.06 7. Srinivas Singh 69,800 0.06 8. Sarvesh Singh 69,800 0.06 9. Annapurna Singh 0 0 10. Sandeep Singh 68,067 0.06 11. Inderjit Kaur Arora 7800 0.01 xii. Consequently, there is no effective change of ownership or control of the shares or voting rights in the Target Company. Moreover, though the legal entity exercising control and voting rights would be the Acquirer acting through its Trustees, it would be for the benefit of only the Transferors and their lineal descendants….”

1.5 Vide an e–mail dated November 11, 2016, SEBI requested the Acquirer to submit an Undertaking as under –

1. “The Trust Deed would be suitably amended to contain the following covenants – a. Any change in the trustees/beneficiaries/partners and any change in ownership or control of share or voting rights held by the LLP/Trust shall be disclosed to the concerned stock exchanges. b. The provision of the SEBI Act and the regulations framed thereunder will apply on the basis that the ownership or control of shares or voting rights vests not only directly with the LLP/trustees but also indirectly with the partners/beneficiaries.

2. The Trust Deed/LLP Agreement shall be amended to ensure that it does not contain any limitation of liability as on the trustees/beneficiaries/partners in relation to the provisions of the SEBI Act and all regulations framed thereunder. 3. The liabilities and obligations of the individual transferors under the SEBI Act and the regulations framed thereunder will not change or get diluted due to the above transfers to the LLPs/Trusts.”

1.6 Vide letter and e–mail dated November 24, 2016, the Acquirer submitted the Undertaking to SEBI, in respect of the Acquirer, which was in accordance with the conditions stipulated in the SEBI e–mail dated November 11, 2016.

Observations of the Takeover Panel on the Application made by the Proposed Acquirer –

A. Takeover Panel’s Recommendations –

2.1 The Application dated October 7, 2016, was forwarded to the Takeover Panel in terms of the proviso to Regulation 11(5) of the Takeover Regulations. The matter was deliberated by the Takeover Panel in its meeting held on January 7, 2017 (minutes of the said meeting were approved on February 17, 2017). The Takeover Panel made the following observations – “In the case of Alkem Laboratories Limited, the Panel recommended grant of exemption subject to the undertakings taken by SEBI in the past.”

Consideration of the Application and Findings –

3.1 I have considered the Application alongwith further correspondences/submissions/clarifications submitted by the Proposed Acquirer; the recommendations of the Takeover Panel and other material available on record.

3.2.1 From the preceding paragraphs, it is noted that –

A. The Application submitted is in respect of the proposed acquisition and control of the shareholding and voting rights in the Target Company i.e. Alkem Laboratories Limited.

B. The aforesaid acquisition is proposed to be made by the Samprada & Nanhamati Singh Family Trust i.e. the Proposed Acquirer, in the following manner – i. Mr. Samprada Singh, one of the Promoters of the Target Company, has settled the Samprada & Nanhamati Singh Family Trust–Acquirer for the benefit of his family members, being the Transferors and their lineal descendants (Entities at serial no. 1 – 11 of Table A). All of the aforesaid entities are either the existing Promoters of the Target Company or their immediate relatives.

ii. Pursuant to a Family Settlement Agreement (dated March 23, 2016), the Transferors propose to transfer a total of 2,52,05,800 (21.08% ) equity shares held by them in the Target Company, to the Acquirer, by way of a gift. Name Pre – Acquisition Post – Acquisition Shares % Shares % A. Promoter Group 1. Samprada Singh 47,30,070 3.96 15,77,190 1.31 2. Balmiki Prasad Singh 62,57,355 5.23 41,595 0.03 3. Manju Singh 13,24,600 1.11 0 0 4. Satish Kumar Singh 34,04,204 2.85 21,444 0.02 5. Premlata Singh 10,12,200 0.85 0 0 6. Sarandhar Singh 18,13,800 1.51 69,800 0.06 7. Srinivas Singh 18,13,800 1.51 69,800 0.06 8. Sarvesh Singh 17,93,000 1.50 69,800 0.06 9. Annapurna Singh 15,91,600 1.33 0 0 10. Sandeep Singh 17,91,267 1.50 68,067 0.06 11. Inderjit Kaur Arora 15,99,400 1.34 7800 0.01 12. Samprada & Nanhamati Singh Family Trust 0 0 2,52,05,800 21.08

C. The proposed acquisition transaction is pursuant to a private family arrangement intended to create a unified structure of the assets of the families for the purpose of providing for the welfare and maintenance of all the families and all lineal/bloodline descendants. The proposed acquisition would not affect the interest of the public shareholders.

D. There will be no change in control of the Target Company pursuant to the proposed acquisition.

E. There is no new acquisition of shares by the Promoters Group and the pre-acquisition and post-acquisition shareholding of the Promoter Group in the Target Company would remain the same at 66.88%.

F. There will also be no change in the public shareholding of the Target Company.

G. The Target Company shall continue to be in compliance with the minimum public shareholding requirements under the Securities Contracts Regulation Rules, 1957 (“SCRR”) and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

H. Vide letter and e–mail dated November 24, 2016, the Acquirer submitted the Undertaking to SEBI, in respect of the Acquirer, which was in accordance with the conditions stipulated in the SEBI e– mail dated November 11, 2016.

I. From the Takeover Panel’s Recommendations, the following is reiterated – “In the case of Alkem Laboratories Limited, the Panel recommended grant of exemption subject to the undertakings taken by SEBI in the past.”

3.2.2 Considering the aforementioned, I am of the view that exemption as sought for in the Application (read with further correspondences/submissions/clarifications) be granted to the Proposed Acquirer, subject to certain conditions as ordered herein below.

Order –

4.1 I, in exercise of the powers conferred upon me under Section 19 of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”) read with Regulation 11(5) of the Takeover Regulations, hereby grant exemption to the Proposed Acquirer, viz. Samprada & Nanhamati Singh Family Trust (represented by its Trustee – Sarvesh Singh), from complying with the requirements of Regulation 3(1) of the Takeover Regulations with respect to its proposed acquisition/exercise of voting rights in respect of the Target Company, viz. Alkem Laboratories Limited, by way of proposed transactions as mentioned in the Application.

4.2 The exemption so granted is subject to the following conditions:

i. The proposed acquisition shall be in accordance with the relevant provisions of the Companies Act, 2013 and other applicable laws. ii. The Undertaking given by the Trustee of the Samprada & Nanhamati Singh Family Trust (Trustee – Sarvesh Singh), vide letter dated November 24, 2016, shall be incorporated in the Deed of Trust within a period of 30 days from the date of this Order and the Proposed Acquirer shall furnish an authenticated copy of the same to SEBI. iii. The proposed acquisition shall be completed within a period of 30 days after revision of the Trust Deed. On completion of the proposed acquisition, the Acquirer shall file a report with SEBI in the manner provided in the Takeovers Regulations, within a period of 21 days from the date of such acquisition. iv. The statements/ averments made or facts and figures mentioned in the Application and in the subsequent correspondences/submissions/clarifications by the proposed acquirer are true and correct. v. The provisions of the SEBI Act and the Regulations framed thereunder will apply on the basis that the ownership or control of shares or voting rights vests not only directly with the Trustees but also indirectly with the beneficiaries of the Acquirer. vi. There shall be no limitation of liability of the Trustees/beneficiaries in relation to the provisions of the SEBI Act and all Regulations framed thereunder. vii. The Proposed Acquirer shall honour their undertakings/declarations and shall also ensure compliance with the statements, disclosures and undertakings made in the Application and in their subsequent correspondences. viii. The Proposed Acquirer/Trust shall also ensure that the covenants in the Trust Deed are not contrary to the above conditions and undertaking provided by the transferors. In such case, the Trust Deed shall be suitably modified and expeditiously reported to SEBI.

ix. The Proposed Acquirer/Trust shall confirm, on an annual basis, that they are in compliance with the exemption order passed by SEBI. The said confirmation shall be furnished to the Target Company, which it shall disclose prominently as a note to the shareholding pattern filed for the quarter ending March 31 each year, under Regulation 31 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. x. The Proposed Acquirer/Trusts shall get the compliance status certified from an Independent Auditor annually and furnish the same to the stock exchanges with a copy endorsed to SEBI for its records.

4.3 The exemption granted above is limited to the requirements of making open offer under the Takeover Regulations and shall not be construed as exemption from the disclosure requirements under Chapter V of the Takeover Regulations; compliance with the SEBI (Prohibition of Insider Trading) Regulations, 2015; Listing Agreement/SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 or any other applicable Acts, Rules and Regulations.

4.4 The Application dated October 7, 2016 (read with further correspondences/submissions/ clarifications) filed by Samprada & Nanhamati Singh Family Trust (represented by its Trustee – Sarvesh Singh), is accordingly disposed of.

Place: Mumbai S. RAMAN Date: March 10, 2017 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA