Order in the matter of Elantas Beck India Limited.

WTM/PS/13/CFD/MAY/2014

BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM : PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under sections 11(1), 11(2)(j), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 read with section 12A of the Securities Contracts (Regulation) Act, 1956 in the matter of non-compliance with the requirement of minimum public shareholding by listed companies

In respect of Elantas Beck India Limited

1. Securities and Exchange Board of India (hereinafter referred to as "SEBI") had passed an interim order dated June 04, 2013 (hereinafter referred to as "the interim order ") with respect to 105 listed companies who did not comply with the Minimum Public Shareholding ("MPS") norms as stipulated under rules 19(2)(b) and 19A of the Securities Contracts (Regulation) Rules, 1957 (hereinafter referred to as "SCRR") within the due date i.e., June 03, 2013. The interim order was passed without prejudice to the right of SEBI to take any other action, against the non-compliant companies, their promoters and/or directors or issuing such directions in accordance with law. The interim order was to be treated as a show cause notice by those companies for action contemplated in paragraph 18 thereof.

2. Elantas Beck India Limited (hereinafter referred to as "the Company") is one such company against whom the interim order was passed. The equity shares of the Company are listed on the Bombay Stock Exchange Limited ("BSE").

3. The Company vide its letter dated June 21, 2013 submitted its reply to the interim order, wherein the following submissions were inter alia made :

(a) The Company has taken the following steps in order to achieve compliance with the MPS requirements :

(i) A delisting offer was announced on December 09, 2009. However, the same was not successful as only 2,71,961 shares were tendered in the reverse book building process as against the required 4,53,683 shares, in terms of SEBI (Delisting of Equity Shares) Regulations, 2009.

(ii) Offer for Sale ("OFS") : An OFS for selling 10,74,555 equity shares (representing 13.55%) was launched on February 11, 2013 for reducing the promoter's (i.e., Elantas GmbH) shareholding from 88.55% to 75%, at a floor price of ₹650/-. At this floor price, the forthcoming demand was only for 7,85,198 shares. Post this OFS, the shareholding of the promoter was brought down from 88.55% to 78.65%.

(iii) Post receipt of approval from SEBI, attempts were made to reduce the shareholding through market sales on the regular segment of the stock exchange to non-promoter entities. However, only 20,248 shares were sold bring the promoter's shareholding down from 78.65% to 78.39% till June 04, 2013. The same was due to insufficient demand on account of various factors such as lack of trading volumes and price volatility in the market impacting small/mid-cap segment.

(b) The Company has also vide letter dated June 03, 2013 sought specific approval for the following : (i) To extend the time granted for achieving compliance beyond June 03, 2013; (ii) To allow the promoter to continue market sales on the regular segment of the stock exchange for an extended time beyond June 03, 2013 and to also allow the promoter to sell equity shares through block deals on the stock exchange to unrelated non-promoter entities; (iii) To grant relaxation from clause 1(b) of the SEBI Circular dated July 18, 2012 regarding the requirement of a two week gap between successive offers for sale and the requirement of twelve weeks cooling off period on either side of an OFS.

(c) The Company also desires to seek relaxation from clause 7(d) of the SEBI Circular dated July 18, 2012 regarding the restriction of allotment of upto 25% of the size of an OFS to a single bidder, other than mutual funds and insurance companies.

(d) The Company has been continuously making efforts towards ensuring compliance with the minimum public shareholding norm and continues to remain committed to achieving the same.

(e) In the light of its submissions, the Company requested SEBI to reconsider the action initiated against the Company, its directors and promoter vide the interim order.

4. Thereafter, the Company vide its letter dated March 6, 2014 inter alia submitted that its promoter undertook an OFS for sale of 2,69,109 equity shares of the Company through the stock exchange mechanism and the same was completed on March 04, 2014. The same was sold for an aggregate consideration of ₹13,89,44,590/-. Pursuant to the OFS, the shareholding of the promoter, as on the date of the reply, reduced to 59,45,761 equity shares in the Company, representing 75%. Consequently, the public shareholding increased to 19,81,921 shares representing 25%. The Company is now in compliance with the MPS requirement prescribed under the SCRR read with the Listing Agreement. The Company requested that the interim order be lifted and all proceedings against the promoters and directors emanating there from be dropped. The promoters and directors of the Company remain fully committed to complying with all the requisite provisions, rules and regulations framed by SEBI from time to time.

5. The Company was afforded an opportunity of personal hearing on April 21, 2014, when the Company's Managing Director, Mr. Ravindra Kumar, Company Secretary, Mr. Shirish Dabir and Mr. Subir Saha (Executive Vice President, ICICI Securities Limited representing Elantas GmbH) appeared and made submissions reiterating those mentioned in the above replies of the Company. The Company was afforded liberty to file additional submissions with respect to the delay in complying with the MPS requirements.

6. The Company filed its additional submissions vide letter dated April 28, 2014, while reiterating its earlier submissions made the following submissions :

(a) Since June 2013, Elantas GmbH has been continuously trying to launch OFS in order to comply with the MPS requirement. However, it faced insufficient demand. The shares of the Company is listed only in the BSE and is infrequently traded. The average daily volume was only around 5,664 shares comprising of 0.06% of the outstanding share capital of the Company. The delivery volumes were only 67% (total delivery volume of 6,33,363 shares, for the period 04.06.2013 to 31.01.2014).

(b) During this tenure, the interest generated from investors was less than the minimum number of investors required as per the OFS guidelines of SEBI and did not have specific approval from this requirement as requested vide the Company's letter dated June 21, 2013.

(c) Average daily volume from February 01, 2014 to March 03, 2014 improved to 13,450 shares per day comprising of 0.15% of the outstanding share capital of the Company. At this juncture, ICICI Securities Ltd. along with Elantas GmbH promptly decided to launch another OFS, which was successfully completed on March 04, 2014 and the shareholding of the promoter reduced to 75%.

(d) In view of the Company's compliance with the MPS requirement, it requested that the interim order be lifted and all proceedings emanating therefrom be dropped as against the Company, its directors and promoter.

7. I have considered the submissions made by the Company and other material available on record. The Company was able to comply with the MPS requirement, as stipulated under rule 19A of the SCRR and clause 40A the Listing Agreement read with section 21 of the Securities Contracts (Regulation) Act, 1956 ("the SCRA"), only on March 04, 2014. The due date for compliance with the said provision was on June 03, 2013. The delay in complying with such statutory requirements has been gross.

8. The Company has provided reasons for not being able to comply with the MPS requirements within the due date. However, from such submissions I note that the Company has proposed for delisting its equity shares during December 2009. This step cannot be said to be for complying with the MPS requirement. Moreover, the amended provisions of rules 19 and 19A of the SCRR came into force only with effect from June 04, 2010, offering a time period of three years (i.e., on or before June 03, 2013) for a listed company to maintain public shareholding of atleast 25%. Pursuant to this amendment and even as per the submissions of the Company, the first step taken by the Company towards compliance was only during February 2013 by way of an OFS. This action was initiated when there were only four months remaining for achieving compliance with the MPS requirement. There has been no submissions from the Company regarding the reasons as to why it did not or could not initiate steps towards compliance from June 2010. The figures with respect to the daily volumes too pertain to the period – June 2013 to January 2014.

9. It is also pertinent to note that OFS is not the only method prescribed by SEBI for listed companies to achieve compliance with the MPS requirement. Issue of shares through rights issue/bonus issue, issuance of shares to the public through prospectus, offer of shares held by promoters through prospectus and any other method approved by SEBI on a case to case basis, are the other methods prescribed by SEBI. The Company has also not made submissions as to why it did not or was not able to pursue the other available methods for complying with the MPS requirements. The Company had, at its disposal a period of three years starting June 04, 2010 till June 03, 2013 for achieving compliance. However, the Company has commenced its OFS only towards the end of the period stipulated for this purpose under the SCRR. Considering the above, I do not find the reasons/submissions offered by the Company with respect to its delay in complying with the MPS requirements, as plausible.

10. As the Company has now complied with the MPS requirements as stipulated under rule 19A of the SCRR read with clause 40A of the listing agreement, it would be appropriate and reasonable to vacate the directions issued against the Company, its promoters and directors. However, in view of the non-compliance of the MPS requirements by the Company within the due date, I am of the considered view that the case be referred for adjudication proceedings for adjudicating the Company under sections 23E and 23H of the SCRA.

11. Accordingly, I, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 read with sections 11(1), 11(2)(j), 11(4) and 11B thereof and section 12A of the Securities Contracts (Regulation) Act, 1956, hereby revoke the directions issued vide the interim order dated June 04, 2013 against the company, Elantas Beck India Limited, its directors, promoters and promoter group, with immediate effect. The matter is referred for adjudication proceedings for adjudicating under sections 23E and 23H of the Securities Contracts (Regulation) Act, 1956. For this purpose, an adjudicating officer shall be appointed by SEBI in terms of section 23I of the Securities Contracts (Regulation) Act, 1956 read with the Securities Contracts (Regulation) (Procedure for Holding Inquiry and Imposing Penalties By Adjudicating Officer) Rules, 2005, and such adjudicating officer shall conduct the inquiry in accordance with law.

12. Copy of this Order shall be served on the stock exchanges and depositories for their information and action that may deem fit and necessary in this case.

PRASHANT SARAN WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA Date : May 27, 2014 Place : Mumbai