Order in the matter of Consolidated Securities Limited

1.0 BACKGROUND 1.1 Consolidated Securities Limited (hereinafter referred to as the target company) is a company incorporated under the Companies Act, 1956 having its Registered Office at 8/19, 3rd Floor, W.E.A., Pusa Lane, Karol Bagh, New Delhi - 110005. The equity shares of the target company are listed on the Bombay Stock Exchange Limited and the Delhi Stock Exchange Limited.

2.0 APPLICATION SEEKING GRANT OF EXEMPTION

2.1 Mundra Credit and Investment Private Limited (hereinafter referred to as the acquirer), vide letter dated May 6, 2010, submitted an application 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) to the Securities and Exchange Board of India (hereinafter referred to as SEBI). It is stated in the said application that the acquirer is the sole promoter of the target company and currently holds 53.28% of its paid up capital. It is further stated that the target company proposes to buy-back a maximum of 6,25,000 equity shares from open market through stock exchanges at a price not exceeding Rs. 133/- per share. The said buy-back would result in an increase of the acquirer’s shareholding from 53.28% to 63.14% i.e. an increase by 9.86%. As the said increase would trigger Regulation 11(1) and (2) of the Takeover Regulations, the present application is filed seeking exemption from the applicability of the aforesaid Regulation 11(1) and (2) inter alia, on the following grounds:

a. The acquirer is the sole promoter of the target company and that there would be no change in management control of the target company even after the proposed buy-back of shares by the target company. b. The acquirer is not acquiring any additional shares in the target company and the increase in the voting rights of acquirer is because of the proposed buy-back. The proposed buy-back would not result in the violation of the conditions of continuous listing. c. The acquirer does not intend to offer their shareholding in the proposed buy-back and that it would not transact in the equity shares of the target company till the closure of the said buy-back. d. The buy-back offer is expected to contribute to the overall enhancement of the shareholders value, resulting in an increase in the return on equity of the target company. The proposed buy-back is expected to lead to reduction of outstanding equity shares, which might lead to increase in earnings per share, thereby creating long term shareholder value.

2.2 The shareholding pattern of the target company (before and after the proposed buy-back) as per the aforesaid application is as under:-

Number of Registered Shareholders shareholders as on Category April 30, 2010 Before the proposed buy-back After the proposed buy-back Number of % of Number % of shares / shares / total shares/total of shares voting rights voting rights voting capital / voting held held rights

Promoter 2* 21,33,363 53.28 21,33,363 63.14 Foreign Investors / 1 1,00,000 2.50 12,45,437 36.86 Banks, MFs.

Foreign Institutional 12 92,336 2.31 Investors / Non Resident Indians / Overseas Corporate Bodies. Public 1084 16,78,101 41.91 Total 1099 40,03,800 100.00 33,78,800 100.00 * The acquirer/promoter holds shares in two separate demat accounts. Therefore, it is shown as two shareholders.

3.0 RECOMMENDATION OF THE TAKEOVER PANEL

3.1 The aforesaid application dated May 6, 2010 was forwarded to the Takeover Panel, by SEBI, in terms of Regulation 4(4) of the Takeover Regulations and the Takeover Panel vide report dated June 7, 2010 has recommended as under:

“It was observed by the panel that the public shareholding after the buyback shall continue to be much above 25%, the minimum level of public shareholding. The buyback offer through the open market will provide an exit option to those public shareholders who desire to exit and will enhance overall shareholders value. Considering all these aspects the panel found the proposal to be in favour of the public shareholding and recommended exemption to the Acquirers from the applicability of regulation 11(1) and 11(2) of the Takeover Regulations subject to the Target Company/Acquirers complying with the relevant provisions of the Companies Act, 1956, SEBI Regulations and Listing Agreements.”

4.0 FINDINGS

4.1 I have considered the application dated May 6, 2010, the subsequent information provided by the acquirer and the recommendations of the Takeover Panel. In terms of the application, the target company proposes to buy-back a maximum of 6,25,000 equity shares from open market at a price not exceeding Rs. 133/- per share. The said buy-back would result in an increase of the acquirer’s shareholding from 53.28% to 63.14%. There is no direct acquisition of any equity shares/voting rights of the target company by the acquirer. It is stated in the application that the buy-back is proposed in line with the target company’s desire to enhance overall shareholders value. It was also stated that the buy-back would lead to reduction in outstanding number of equity shares. Even after the proposed buy-back (in case of 100% response), the public shareholding in the target company would remain at 36.86%. I note that, even after the proposed acquisition, the public shareholding in the target company would be at a level more than what is required for meeting the conditions for continuous listing. Thus, the minimum public shareholding requirement specified in Clause 40A of the Listing Agreement would not be breached by the proposed increase in shareholding of the acquirer.

In terms of Regulation 11(1) of the Takeover Regulations, no acquirer who, together with persons acting in concert with him, has acquired, in accordance with the provisions of law, fifteen per cent or more but less than fifty five per cent of the shares or voting rights in a company, shall acquire, either by himself or through or with persons acting in concert with him, additional shares or voting rights entitling him to exercise more than five percent of the voting rights, with post acquisition shareholding or voting rights not exceeding fifty five per cent in any financial year ending on 31st March unless such acquirer makes a public announcement to acquire shares in accordance with the regulations. In the present case, the proposed increase in the voting rights of the acquirer is from 53.28% to 63.14%. The acquirer, vide an electronic mail dated May 31, 2010 stated that the exemption from the applicability of Regulation 11(1) of the Takeover Regulations was sought for crossing the threshold limit of 55% of the voting capital beyond the existing 53.28%. Though, the proposed increase in the voting rights of the acquirer was only 1.72% before reaching 55%, the same would trigger Regulation 11(1) of the Takeover Regulations, as the holding of the acquirer would go beyond 55%.

Therefore, the present case would also be considered for grant of exemption from the applicability of Regulation 11(1) in respect of the proposed increase by 1.72%. It was further stated that, the increase from 55% to 60% of the voting capital is already allowed under second proviso to Regulation 11(2) and accordingly, the exemption from the applicability of Regulation 11(2) was sought for increase in the acquirer’s shareholding beyond 60% of the voting capital till 63.14%. Regulation 11(2) of the Takeover Regulations would also be attracted as voting rights would increase to 63.14%, an increase by 8.14% beyond 55%. As the acquirer is eligible to acquire additional shares or voting rights which entitled it to exercise upto 5% of the voting rights of the target company without making a public announcement, in terms of the second proviso to Regulation 11(2), exemption beyond 55% needs to be granted only in respect of the remaining 3.14% assuming that the buy-back would get 100% response.

4.2 I note that the Takeover Panel has recommended exemption to the acquirer from the applicability of Regulation 11 (1) and (2) of the Takeover Regulations. However, considering the facts and circumstances of the case and the relevant provisions of the Takeover Regulations, as mentioned above, I am of the view that the acquirer in the present case be exempted from complying with a. the provisions of Regulation 11(1) of the Takeover Regulations in respect of the proposed increase of 1.72% till the acquirer reaches 55%; and b. the provisions of Regulation 11(2) of the Takeover Regulations in respect of the proposed increase of 3.14% over and above the limit of 5% as per the second proviso to Regulation 11(2).

In view of the above, the acquirer would not be eligible to avail the benefit in terms of second proviso to Regulation 11(2) of the Takeover Regulations, in future.

5.0 ORDER

5.1 In view of the foregoing, 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 the acquirer, namely, Mundra Credit and Investment Private Limited from complying with the provisions of Regulation 11(1) thereof in respect of the proposed increase in voting rights by 1.72% (which in effect would increase the acquirer’s shareholding/voting rights to 55%) and Regulation 11(2) of the aforesaid Regulations with respect to the proposed increase in voting rights of the acquirer by 3.14% over and above the 5% limit available to the acquirer in terms of the second proviso to Regulation 11(2) thereof, pursuant to the proposed buy-back of equity shares by the target company, Consolidated Securities Limited.

5.2 The exemption is granted 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 acquirer i.e. the promoter of the target company shall ensure compliance with the statements, disclosures and undertakings made in the application.

c. The proposed buy-back shall be in accordance with the relevant provisions of the Companies Act, 1956, Securities and Exchange Board of India (Buy-Back of Securities) Regulations, 1998, the Listing Agreement and other applicable laws.

5.3 This exemption shall not be construed as exemption from requirements of any 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.

5.4 The acquirer would not be eligible to avail the benefit in terms of the second proviso to Regulation 11(2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, in future.

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

PLACE : MUMBAI DATE: JULY 8, 2010