Order in the matter of EON Electric Limited

1.0 BACKGROUND 1.1 M/s Eon Electric Limited (hereinafter referred to as the target company) is a company incorporated under the Companies Act, 1956, having its registered office at House No.1048, Sector 14, Sonepat, Haryana-131001. The equity shares of the target company are listed on the National Stock Exchange of India Limited (hereinafter referred to as NSE) and Bombay Stock Exchange Limited(hereinafter referred to as BSE).

2.0 APPLICATION SEEKING GRANT OF EXEMPTION

2.1 Mr.Pranav Kumar Ranade (the joint Director of the target company) on his behalf and on behalf of VPM Industrial Services Corpn.LLP, Mr. V.P.Mahendru, Mr. Vivek Mahendru. Mrs. Bela Mahendru, Mr. Vinay Mahendru, Mrs. Ratna Mahendru, Mr. Vimal Mahendru, Mrs. Richa Mahendru, PKR Hitech Industrial Corpn. LLP, Mrs. Ameeta Ranade, Mr. Vikram Ranade, Mr. Prashant Ranade, P.K.Ranade (HUF) and Mr. Keshav Mahendru all belonging to promoters group (hereinafter collectively referred to as the acquirers), vide letter dated July 11, 2011 filed an application 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).

2.2 From the application, the following have been noted:

(i) The acquirers belong to the promoter group of the target company and hold 80,23,312 equity shares of the target company representing 44.97% of the total equity share capital.

(ii) The target company proposes to buy-back a maximum of 17,84,162 equity shares represents 6.45%of the total paid up equity capital and free reserves of the company as on March 31, 2011 at a price not exceeding `130/- per equity share, from the open market through the stock exchanges.

(iii) The aforesaid buy-back proposal has been approved through the board resolution dated July 09, 2011.

(iv) During the financial year 2011-12, the promoters of the target company have acquired 8,90,000 equity shares representing 4.99% of the enhanced paid up share capital of the target company by way of allotment of shares pursuant to conversion of warrants, on June 16, 2011. After the said allotment of shares, the shareholding of the promoters group increased to 80,23,312 (44.97%) of the enhanced paid up share capital of the target company and the said acquisition was exempted under creeping acquisition of 5% limit available under regulation 11(1) of the regulations.

(v) Pursuant to the proposed buy-back, the shareholding of the promoter group (including the acquirers) would increase from 44.97% to 49.97% (5% of the expanded share capital) assuming 100% success of the said buy-back.

(vi) The proposed buy-back by the target company would increase the voting rights of the acquirers to 49.97% thereby requiring them to comply with the requirements of Regulation 11(1) of the Takeover Regulations. The instant application has been made to seek exemption from open offer obligation, inter alia on the following grounds:

a) There is no direct acquisition of shares or voting rights by the acquirers and the increase in the shareholding of the promoters (acquirers) from current holding of 44.97% to 49.97% is only incidental to the buy-back proposal of the target company on account of reduction in capital assuming successful buy-back of 17,84,162 shares. b) The public shareholding in the target company would be at a level more than what is specified in clause 40A of the listing agreement and the promoters’ holding would be below 50%. c) The price at which the buy-back is proposed is `130/- per share which is at a premium of `51.05/- per share and `50.85/- per share over the closing price at NSE and BSE respectively as on July 8, 2011 i.e. the day preceding the date of the Board meeting. d) At present the company has accumulated free reserve and satisfactory liquidity. The buy-back is being proposed by the company to maximize returns to investors and enhance overall shareholder value by returning surplus cash to the shareholders.

2.3 The shareholding pattern of the target company (as given in the application) before and after the proposed buy-back (assuming 100% response) is as under:

Before the proposed buy-back After the proposed buy-back Shareholders No of Shares/ % of Shares/ No of Shares/ Category % of Shares/ total total voting rights total voting total voting voting rights held held rights held rights held Promoter Group 8023312 44.97 8023312 49.97 (acquirers) FIs/ Banks 0 0 0 0 Non Institutions 9818316 55.03 8034154 50.03 Total 17841628 100 16057466 100

3.0 RECOMMENDATION OF THE TAKEOVER PANEL

3.1 The application was forwarded to the Takeover Panel by SEBI in terms of Regulation 4(4) of the Takeover Regulations. The Takeover Panel vide Report dated September 06, 2011, has recommended as under:

“It was observed by the Panel that the proposed buy-back of ` 130/- per share would be at a substantial premium of about ` 51/- per share and the public share holding even after successful completion of buy-back would be above 50%. In view of the above facts, as also in view of the consideration that the proposed buy-back will maximize return to investors and enhance overall shareholders value, the Panel recommended for grant of exemption to the Applicants from the applicability of regulation 11(1) of SAST Regulations, subject to the Target Company/Acquirers complying with the relevant provisions of the Companies Act, 1956, SEBI Regulations and Listing Agreement(s)”.

4.0 FINDINGS

4.1 I have considered the application, the abovementioned recommendations of the Takeover Panel and other relevant material available on record. I note that though pursuant to the proposed buy-back of the target company, the shareholding and voting rights of the promoter group (the acquirers) in the target company would increase from 44.97% to 49.97% of the outstanding equity share capital; the number of shares held by them would remain same at 8023312. The increase in shareholding and voting rights of the acquirers is incidental to the buy-back offer of the target company. The proposed buy-back offer would not result in change in control over the target company, as the acquirers are already the promoters and in control over the target company. The acquirers have also stated that they do not have any intention to participate in the buy-back of the target company. The increase in the acquirers shareholding and voting rights in the target company would be only incidental to the proposed buy-back by the target company. As per the application, even after the proposed buy-back (assuming 100% response), the public shareholding in the target company would be at a level more than what is required for meeting the minimum public shareholding requirement specified in Clause 40A of the Listing Agreement. I have noted that, the proposed buy-back would be done through open market in terms of Securities and Exchange Board of India (Buy-Back of Securities) Regulations 1998 and that, the proposed buy-back is at a price `130/- which is at a premium of `51.05/- per share and `50.85 per share over the closing price (as on July 08,2011).

4.2 Considering the facts and circumstances, I agree with the recommendations of the Takeover Panel and grant exemption to the acquirers from the applicability of Regulation 11(1) of the Takeover Regulations, pursuant to the proposed buy-back offer of the target company, subject to the target company/acquirers complying with relevant provisions of law.

5.0 ORDER

5.1. 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 the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, hereby grant exemption to the acquirers from complying with the provisions of Regulation 11(1) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 with respect to the proposed increase in voting rights from 44.97% to 49.97%, consequent upon the proposed buy-back of equity shares by the target company.

5.2. The exemption is granted subject to the following conditions:

(a) The statements/averments made/facts or figures given in the application and in the subsequent correspondence are true and correct to the best knowledge of the acquirers. (b) The acquirers shall ensure compliance with the statements, disclosures and undertakings made in the application and in the subsequent correspondence. (c) The proposed buy-back of equity shares shall be in accordance with the Companies Act, 1956, the 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.

PRASHANT SARAN WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA PLACE: MUMBAI DATE: September 21, 2011