Order in the matter of Cybertech Systems and Software Limited

1.0 BACKGROUND 1.1 Cybertech Systems and Software Limited (hereinafter referred to as the target company) is a company incorporated under the Companies Act, 1956, having its registered office at Cyber Tech House, Plot No. B-63/64/65, Road No. # 21/34, J.B. Sawant Marg, MIDC, Wagle Estate, Thane - 400604. The target company is listed on the Bombay Stock Exchange Limited and the National Stock Exchange of India Limited.

2.0 APPLICATION FOR GRANT OF EXEMPTION 2.1 The target company (on behalf of its promoter group) had filed an application dated October 9, 2009 read with subsequent letters/electronic mails (dated November 6, 2009, November 10, 2009 and December 21, 2009), under Regulation 4(2) read with Regulation 3(1)(l) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the Takeover Regulations). It is stated that Mr. Viswanath Tadimety, along with Mr. Seetaramchandra Tadimety Rao, Ms. Jyoti Tadimety, Ms. Amogha Tadimety, Ms. Sukhada Tadimety, Ms. Shanta Radhakrishna Shanbhag and Mr. Steven Jeske (collectively referred to as the acquirers) belong to the promoter group of the target company and presently hold 23.59% of the equity capital of the target company. It is also stated in the application that the Board of Directors of the target company at its meeting held on August 20, 2009 approved the buy back of 66,17, 836 equity shares of the target company of face value of Rs 10/- each at a fixed price of Rs 12/- through tender offer method and that pursuant to the said offer, the promoters/acquirers shareholding would increase from 23.59% to 31.46%. Since, the post buy back shareholding of the acquirers would increase beyond 5%, an exemption is sought from the applicability of Regulation 11(1) of the Takeover Regulations under Regulation 3(1)(l) read with Regulation 4(2) of the Takeover Regulations, inter alia, on the following grounds:- a) Increase in voting rights of the acquirers is incidental to the buy back proposal of the target company and is not an active acquisition. Even after buy back of the equity shares by the target company (in case of 100% response), the public shareholding in the target company would be at a level more than which is required for meeting the conditions for continuous listing. b) The acquirers do not propose to acquire a single share of the target company either directly or indirectly and that there would not be any change in control over the target company pursuant to the increase in the shareholding of the acquirers.

3.0 RECOMMENDATION OF THE TAKEOVER PANEL 3.1 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 December 21, 2009, has recommended exemption to the acquirers from the applicability of Regulation 11(1) of the Takeover Regulations.

4.0 HEARING BEFORE SEBI 4.1 On a consideration of the facts and circumstances of the case, SEBI was of the prima facie view that the same was not a fit case for grant of exemption. Accordingly, an opportunity for personal hearing was granted to the acquirers on March 2, 2010 when Mr. C.N. Rao, Executive Director of the target company and Mr. Sateesh K. Wadagbalkar, Company Secretary represented the acquirers and interalia submitted that the increase in the voting rights of the promoters/acquirer is incidental to the buy back proposal of the target company and is not an active acquisition.

5.0 FINDINGS 5.1 I have considered the application for grant of exemption, the recommendation of the Takeover Panel, submissions made on behalf of the acquirers and other material available on record. I note that, pursuant to the proposed buy back offer of 66,17,836 equity shares of the target company, the shareholding of the acquirers would increase from 23.59% to 31.46%. It is pertinent to note that the share price of the target company as on the date prior to the date of the exemption application (which is also the date on which the shareholders have approved the buy back proposal) was in the range Rs. 15.05/--15.10/-, i.e., above the buy back offer price of Rs. 12/-. Further, the share price of the target company was in the range of Rs. 21/-to Rs. 22/- during the month of January 2010 and currently quoting at Rs. 18.50/-, which is higher than the buy back offer price of Rs. 12/-. It is noted that the shares of the target company are frequently traded. In such circumstances, the shareholders may not be interested in tendering their shares in the buy back offer as they have the option to offload their shares in the open market. In the facts and circumstances of the present case, I do not find this as a fit case for grant of exemption to the acquirers. In the meanwhile, SEBI received a copy of the letter dated March 5, 2010 from the target company, informing Bombay Stock Exchange Limited that its board of directors have decided to withdraw the buy back proposal which was earlier approved by them on August 20, 2009. In view of the same, the present application becomes infructuous and the same is accordingly disposed of.

6.0 ORDER 6.1 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 Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, hereby dispose of the application dated October 9, 2009 filed in the present matter, as discussed above.

DR. K. M. ABRAHAM WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA PLACE: MUMBAI DATE : MARCH 11, 2010