Order in the matter of Hindustan Composites Limited

1. Hindustan Composites Limited (hereinafter referred to as the target company) is a company incorporated under the Companies Act, 1956 having its Registered Office at B-11, Paragon Condominium, P.B. Marg, Worli, Mumbai– 400013. The equity shares of the target company are listed on the Bombay Stock Exchange Limited (hereinafter referred to as BSE), National Stock Exchange of India Limited (hereinafter referred to as NSE) and the Calcutta Stock Exchange Limited (hereinafter referred to as CSE). Mr. Pawan Kumar Choudhary, vide letter dated November 8, 2010 filed an application with the Securities and Exchange Board of India (hereinafter referred to as SEBI) under Regulation 4(2) read with the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the Takeover Regulations) for himself and on behalf of Pallavi Trading & Manufacturing Company Limited, Surdas Trading & Manufacturing Company Limited, Lotus Udyog Limited, Mody Investors Private Limited, Axon Trading & Manufacturing Company Limited, Pallavi Resources Limited, Leaders Healthcare Private Limited, Noble Trading Co. Limited, Rasoi Limited, Rasoi Finance Limited, Silver Trading & Services Limited, J.L. Morison India Limited and Mr. Varunn Mody (hereinafter collectively referred to as the acquirers). The said application is filed with respect of the proposed increase in the voting rights of the acquirers in the target company from 67.11% to 75%, pursuant to the proposed buyback of 5,78,320 equity shares by the target company from the open market at a price not exceeding `550/- per share. It is stated in the application that the acquirers belong to the promoter group of the target company. The exemption is sought from the applicability of Regulation 11(2) of the Takeover Regulations inter alia on the following grounds:

a. There is no direct acquisition of shares or voting rights by the acquirers and the increase in their voting rights from 67.11% to 75% is on account of reduction in capital assuming successful buy-back of 5,78,320 equity shares and that their combined shareholding in terms of number of shares would remain the same. b. There would be no change in management control of the target company after the buy-back transaction as they are already in control over the target company. c. The acquirers do not propose to acquire a single share of the target company either directly or indirectly. d. Even after the buy back of the equity shares by the target company, the voting rights of the acquirers shall remain maximum at the level of 75% which meets with the requirements of Clause 40A of the listing agreement. The buy-back offer is being implemented to optimize returns to shareholders and enhance overall shareholder value. The proposed buy-back is expected to enhance earnings per share, thereby creating long term shareholder value.

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 Shareholders Registered Before the proposed Category shareholders Buyback After the Proposed Buyback Number of % of Number of % of shares/ shares/total shares/ voting shares/ voting voting capital rights voting rights held held rights

Promoter 20* 36,91,260 67.11 36,91,260 75.00 Foreign Investors/ 8 798 0.01 Banks, MFs. Foreign Institutional 61 11,536 0.21 Investors/Non Resident Indians/Overseas 12,30,420 25.00 Corporate Bodies.

Public 12,385 17,96,406 32.66 Total 12,474 55,00,000 100.00 49,21,680 100.00 * includes more than one folio for some promoter companies.

3. Thereafter, vide letter dated November 16, 2010, Mr. Pawan Kumar Choudhary had forwarded the details of the creeping acquisitions by the promoters of the target company under Regulation 11(2) of the Takeover Regulations. The aforesaid application was forwarded to the Takeover Panel, by SEBI, in terms of Regulation 4(4) of the Takeover Regulations and the Takeover Panel vide letter dated December 14, 2010 forwarded the following recommendation :

“Panel noted the above and as the buy-back, if fully carried out will be in line with Clause 40A of the Listing Agreement (the public holding 25%) and there is no change in the management and the shareholding of promoters may go up from 67.11 to 75%. As this is as per the procedure laid down by the Companies Act, 1956, the Panel recommends the granting of exemption sought for.”

4. I have considered the application dated November 8, 2010, the subsequent information provided by the acquirers, the recommendation of the Takeover Panel and other relevant materials available on record. In terms of the application, the target company proposes to buy-back a maximum of 5,78,320 equity shares from the open market at a price not exceeding `550/- per share. The proposed buy-back, as per the application, would result in an increase of the acquirers’ shareholding from 67.11% to 75% i.e. 7.89%. There is no direct acquisition of any equity shares/voting rights of the target company by the acquirers. The acquirers, who are the promoters of the target company, are already in control holding 67.11% and the resultant increase due to the proposed buy back would result in any change in control. Further, according to the acquirers, the buy-back offer is being implemented to optimize returns to shareholders and enhance overall shareholder value and that the same is expected to enhance earnings per share, thereby creating long term shareholder value. Even after the proposed buy-back of the equity shares by the target company (in case of 100% response to the proposed buyback), the public shareholding in the target company would remain at 25%, which would satisfy the conditions for continuous listing under the listing agreement. Therefore, I do find any reason to disagree with the recommendation of the Takeover Panel in grating exemption to the acquirers from complying with the provisions of Regulation 11(2) of the Takeover Regulations.

5. Having decided to grant exemption to the acquirers, I note that, in terms of second proviso to Regulation 11(2) [inserted with effect from October 30, 2008] of the Takeover Regulations, an acquirer (together with persons acting in concert with him), holding 55% or more but less than 75% of shares or voting rights in a target company, may acquire additional shares or voting rights entitling him to five percent of the voting rights in a target company without making a public announcement, if the increase in the shareholding or voting rights of the acquirer is pursuant to a buy-back of shares by the target company. I note that the acquirers had utilized the creeping acquisition limit of 5%, when they had acquired equity shares of the target company from the open market.

6. 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 acquirers/promoters, namely Mr. Pawan Kumar Choudhary, Pallavi Trading & Manufacturing Company Limited, Surdas Trading & Manufacturing Company Limited, Lotus Udyog Limited, Mody Investors Private Limited, Axon Trading & Manufacturing Company Limited, Pallavi Resources Limited, Leaders Healthcare Private Limited, Noble Trading Co. Limited, Rasoi Limited, Rasoi Finance Limited, Silver Trading & Services Limited, J.L. Morison India Limited and Mr. Varunn Mody from complying with the provisions of Regulation 11(2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 in respect of their proposed increase in the voting rights from 67.11% to 75% (assuming 100% response to the proposed buy-back) pursuant to the proposed buy-back of equity shares by the target company, Hindustan Composites Limited.

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

a. The statements/averments made/facts or figures given in the application and subsequent correspondence are true and correct to the best knowledge of the acquirers. b. The acquirers i.e. promoter and promoter group 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. 8. As the acquirers have already utilized the creeping acquisition limit of 5% under second proviso to Regulation 11(2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, they are advised not to seek any further exemption from the provisions of Regulation 11(2) thereof, pursuant to any further buy-back offer, if any, announced by the target company.

9. This exemption shall not be construed as an exemption from the 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.

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

PLACE: MUMBAI DATE: JANUARY 13, 2011