Order in the matter of Hindustan Cables Limited - exemption under Regulation 25A of SEBI Delisting of Equity Shares) Regulations, 2009

Under Regulation 25A of the Securities and Exchange Board of India (Delisting of Equity Shares) Regulations, 2009. In the matter of Delisting of Equity Shares of Hindustan Cables Limited

1. Hindustan Cables Limited (“Hindustan Cables”/Applicant”) is a Public Sector Unit (under the department of Heavy Industries & Public Enterprises, Government of India (“GOI”), incorporated on August 04, 1952 under the Companies Act of 1913. Shares of Hindustan Cables/the Applicant are listed on Ahmedabad Stock Exchange (“ASE”) and Calcutta Stock Exchange (“CSE”). The shares of Hindustan Cables were earlier also listed on the Delhi Stock Exchange (“DSE”) which was derecognized with effect from November 19, 2014. The registered office of Hindustan Cables/the Applicant is located at 9, Elgin Road, Kolkata-700020.

2.1 Securities and Exchange Board of India (“SEBI”) received an application vide letter dated October 22, 2016 (“Application”), from Hindustan Cables/the Applicant seeking exemption from certain provisions of SEBI (Delisting of Equity Shares) Regulations, 2009 (SEBI Delisting Regulations) for voluntary delisting of its shares from ASE and CSE.

2.2 The aforesaid application dated October 22, 2016 inter alia states the following- i. Hindustan Cables/the Applicant is a public sector unit under the Department of Heavy Industries and Public Enterprises, Government of India. The Company was a pioneer in telecom cable in the country and gradually started the business of manufacturing of Polyethylene Insulated Jelly Filled Cables and Optical Fibre.

ii. The existing share capital of the Company comprises of 41,93,61,125 equity shares out of which 41,76,92,325 equity shares aggregating 99.60% are held by GOI.

iii. Pursuant to disinvestment decision of GOI in the year 1992, 16,68,800 (0.40%) of the present share capital of Hindustan Cables/the Applicant were sold by GOI to one Financial Institution namely Canbank Mutual Fund, which as on date is the only public shareholder in the Company holding shares in physical mode. Pursuant to disinvestment, the shares of the Company were listed on the regional stock exchanges.

iv. Due to competition with private sector and rapid change in the telecommunication technology, the demand for telecom cables got drastically reduced and the Company started incurring huge losses and several attempts for its revival failed.

v. The Company was registered under BIFR in the year 2002. As per audited financials of the Company for the year ended 31.3.2015 the Company has a negative net worth of Rs.7,50,372.31 lakhs, secured loan of Rs.3,06,571.83 lakhs and unsecured Loan of Rs.2,87,022.72 lakhs. Further, there is no production activity in the Company in any of its manufacturing facilities since January 2003.

vi. Due to mounting losses and financial crisis, the Company has not been in compliance with various clauses of listing agreement and remains suspended at CSE. ASE has also filed for voluntary de-recognition.

vii. The Union Cabinet on September 28, 2016 gave its approval for the closure of the Company as per the provisions of the Companies Act, 1956/2013 and other relevant Acts.

viii. In order to comply with the directions of the Union Cabinet, the Company now proposes to delist its equity shares from the stock exchanges in adherence with the SEBI Delisting Regulations and shall be required to comply with the requirements stated thereunder.

ix. Due to the huge financial burden into the Company and there being only one public shareholder in the Company, the provision of Chapter III and Chapter IV of the SEBI Delisting Regulations are likely to act as impediment to the implementation of the direction of Union Cabinet by the Company.

x. Since there is only one public shareholder in the Company and the shares of the Company are currently not traded on stock exchanges, giving a fair offer to the only public shareholder would suffice the compliance of spirit of the Delisting Regulations and would not in any manner hamper the interest of investors in securities and securities market.

xi. As the Union Cabinet has already passed an order for closure of the Company in a time bound manner, the following exemptions are sought by the Company under Regulation 25A of the Delisting Regulations:  “Since the Company has only one public shareholder, the requirement of passing a special Resolution under Regulation 8(1) be dispensed with.  Exemption from making in-principle application under Regulation 8(2), 8(3) and 8(4) of the Delisting Regulations.  Since the Company is a Sick Company registered with BIFR, the stock exchanges be directed to waive off all the outstanding fees payable by the Company including any fees required to be paid in respect of Delisting Requirement of the Stock exchange.  Exemption from entire Chapter IV of the Delisting Regulations and the Company may be allowed to make exit offer to the shareholder by sending an Exit offer letter to the public shareholder by Speed Post with Acknowledgement due at a price to be determined in accordance with Regulation 27(3) (a) of the Delisting Regulations.  The Stock Exchange be directed to grant delisting to the Company on satisfaction that an Exit Opportunity had been given to the public shareholders at a fair price as computed under Regulation 27(3) (a) of the Delisting Regulations, irrespective of tender of shares by the public shareholder of the Company, thereby granting exemption from Regulation 8(5) of the Delisting Regulations.”

Consideration of Issues and Findings-

3. I have considered the Application dated October 22, 2016 and other correspondence available on record. In this regard, I note as under:

3.1 Regulation 25A of the Delisting Regulations, 2009 (as amended), states – “25A. Power to relax strict enforcement of the Regulations. (1) The Board may for reasons recorded in writing, grant relaxation from strict enforcement of any of the requirements of these regulations, if the Board is satisfied that the relaxation is in the interests of investors in securities and the securities market. (2) For seeking exemption under sub-regulation (1), the promoter or the acquirer or the Company shall file an application with the Board, supported by a duly sworn affidavit, giving details for seeking such exemption and the grounds on which the exemption has been sought. (3) The promoter or the acquirer or the Company, as the case may be, shall along with the application referred to under sub-regulation (3) pay a nonrefundable fee of rupees fifty thousand, by way of a banker’s cheque or demand draft payable in Mumbai in favour of the Board. (4) The Board may after affording reasonable opportunity of being heard to the applicant and after considering all the relevant facts and circumstances, pass a reasoned order either granting or rejecting the exemption or relaxation sought as expeditiously as possible.”

3.1.1 At the outset, it is noted that as per sub–regulation (4) of Regulation 25A of the SEBI Delisting Regulations, 2009, a reasoned order either granting or rejecting the exemption sought by an applicant, shall be passed by SEBI after affording such applicant a reasonable opportunity of being heard and after considering all the relevant facts and circumstances. In the instant proceedings, however, I am of the opinion that although Hindustan Cables/the Applicant has not asked for an opportunity of being heard, the submissions made by it to substantiate the request for exemptions vide the Application and other correspondence available on record are sufficient for the purpose of considering the issue of whether grant of relaxation from strict enforcement of any of the requirements of the SEBI Delisting Regulations is in the interests of investors in securities and the securities market.

3.2 Hindustan Cables/the Applicant has further submitted that the requirement of obtaining prior approval of the Shareholders, etc. by passing a Special resolution, making application for in-principle approval from the concerned stock exchanges, etc. under Regulation 8(1) of the SEBI Delisting Regulations, requirement of filing an audit report along with the in-principle application to the recognized stock exchange, payment of listing fees to the stock exchange concerned, compliance with any condition of the listing agreement with the recognized stock exchange, etc. under Regulation 8(2), 8(3) and 8(4) of the SEBI Delisting Regulations be dispensed with. In this regard, I note that- i. The existing share capital of the Company comprises of 41,93,61,125 equity shares of the face value of Rs. 10 each. The shareholding pattern of Hindustan Cables/the Applicant are as under–

Category Shareholders No. of Percentage of shares Shareholding Promoter Government of India 41,76,92,325 99.60% Public Canbank Mutual Fund 16,68,800 0.40% ii. From the above, it is observed that Hindustan Cables/the Applicant has only one public shareholder, who holds 0.40% of the shares and the remaining 99.60% of the shares are with the promoters (GOI).

iii. As regards the one public shareholder, Hindustan Cables/the Applicant has stated that they would provide exit to the said public shareholder at a fair price to be determined in consultation with Merchant Banker.

iv. The shares of Hindustan Cables/the Applicant are listed only on regional stock exchanges, viz. ASE and CSE and not listed on any stock exchange having nationwide trading terminals.

v. There has never been any trading in the scrip of the Company. Further, there is no production activity in the Company or any of its manufacturing facilities since January 2003.

vi. In respect of the exemption sought from the payment of all outstanding fees payable by Hindustan Cables/the Applicant including any fees required to be paid in respect of the delisting requirement of the stock exchange, I note that the waiver of fees i.e any existing listing fee (as per Regulation 8(4) (c) of the SEBI Delisting Regulations) or any other fee to be paid in respect of delisting requirement to the stock exchanges, is a matter of commercial consideration. As regards the said exemption, Hindustan Cables/the Applicant may take up the same with concerned Stock Exchange.

3.2.1 Under the facts and circumstances mentioned above, I am of the view that exemption from compliances of the provisions of Regulations 8(1), (2), (3) and (4) (except waiver of any existing listing fee as per Regulation 8(4) (c)) would not hamper the interests of the public shareholder or the securities market and can be dispensed with.

3.3 Hindustan Cables/the Applicant, in its Application has also submitted that exemption from Regulations 9 to 21 under Chapter IV of the SEBI Delisting Regulations may be granted and they be allowed to make exit offer to the shareholder by sending an Exit Offer letter to the public shareholders due at a price to be determined in accordance with Regulation 27(3)(a) of the SEBI Delisting Regulations. Chapter IV of the of the SEBI Delisting Regulations (Regulations 9 to 21) deals with procedure to be followed to provide exit opportunity to the existing shareholders, in case of voluntary delisting by a Company. As per Regulation 10 of the SEBI Delisting Regulations, the promoters of the Company, who make application for voluntary delisting are required to make public announcement. Regulation 11 to 21 of the SEBI Delisting Regulations deals with the procedures to be followed for the purpose of delisting, such as opening escrow account and depositing money in the account, dispatching letter of offer, bidding period, book building process, minimum number of shares to be acquired, payment of consideration, etc. In this regard, I note that- i. The compliance with requirements under Chapter IV of SEBI Delisting Regulations may not be insisted upon for the following reasons:  Hindustan Cables/the Applicant is listed solely on regional stock exchanges (ASE and CSE). There has never been any trading in the scrip of the Company. Further, the trading of its shares remains suspended at CSE.  Hindustan Cables/the Applicant has not undertaken any operations since January 2003 and the attempts for revival made by the Department of Heavy Industries and Public Enterprises; GOI have failed.

 Hindustan Cables/the Applicant was registered under BIFR in the year 2002. BIFR is of the opinion that the Company cannot be revived.  The Union Cabinet has already given its approval for the closure of Hindustan Cables/the Applicant.  There is only one public shareholder, who holds 0.40% of the shares since 1992 (in physical mode) to whom shares were allotted pursuant to disinvestment and the remaining 99.60% are with the promoter of the Company (GOI).  Hindustan Cables/the Applicant in its Application dated October 22, 2016 has undertaken that they would provide exit to the public shareholder at fair price to be determined in consultation with Merchant Banker.

Order –

4. 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 25A of the SEBI (Delisting of Equity Shares) Regulations, 2009, direct as under – i. The Applicant, viz. Hindustan Cables Ltd. is exempted from the requirement of passing a Special resolution under Regulation 8(1) of the SEBI Delisting Regulations, requirement of making application and obtaining in-principle approval from the recognized stock exchange under Regulation 8(2), 8(3) and 8(4) of the SEBI Delisting Regulations, ii. The Applicant, viz. Hindustan Cables Ltd. is exempted from complying with the Regulations 9 to 21 under Chapter IV of the SEBI Delisting Regulations (i.e. requirement relating to Public Announcement, depositing money in Escrow Account, letter of offer, offer price, bidding period, book building process, Minimum number of shares to be acquired, etc.) and the Applicant is allowed to make exit offer to the shareholder by sending an Exit Offer letter to the public shareholder due at a price to be determined in accordance with Regulation 27(3) (a) of the SEBI Delisting Regulations. iii. It is however, clarified that exemption sought by them in respect of the waiver of fees payable to the Stock Exchange cannot be granted for the reasons mentioned in Paragraph No. 3.2 (vi) above.

5. The Applicant, viz. Hindustan Cables Ltd. shall make the final application for delisting to the concerned stock exchanges within one year from the date of this Order.

6. This Order issued under Regulation 25A of the Delisting Regulations, 2009, is limited to the relaxation in timelines as ordered above. This Order shall not be construed as absolving or exempting Hindustan Cables Ltd./the Applicant, its Promoters and Directors along with others concerned, from complying with any other law or condone lapses/violations, if any, of any other law administered by SEBI.

7. This Order shall come into force with immediate effect.

8. The Application dated October 22, 2016 filed by Hindustan Cables Ltd./the Applicant is accordingly disposed of.

Date: December 08, 2016 S. RAMAN Place: Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA