Order in the matter of indirect acquisition of share and voting rights of GMR Infrastructure Ltd

WTM/PS/11 /CFD/DCR-I/JULY/2013

SECURITIES AND EXCHANGE BOARD OF INDIA ORDER In the matter of indirect acquisition of shares and voting rights of GMR Infrastructure Limited – Application filed under regulation 11(3) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011

1. GMR Infrastructure Limited (hereinafter referred to as "the Target Company") is a company incorporated under the Companies Act, 1956, having its registered office at SKIP House, 25/1, Museum Road, Bangalore - 560 025. The equity shares of the Target Company are listed on the Bombay Stock Exchange Limited ("BSE") and the National Stock Exchange of India Limited ("NSE").

2. Mr. G. Mallikarjuna Rao in his capacity as a Trustee of Grandhi Varalakshmi Mallikarjuna Rao Trust ("GVMR Trust"), Srinivas Bommidala and Ramadevi Trust ("SBR Trust"), Grandhi Buchi Sanyasi Raju and Satyavathi Smitha Trust ("GBSRSS Trust") and Grandhi Kiran Kumar and Ragini Trust ("GKKR Trust"), and as authorised by the other Trustees of the aforesaid Trusts, filed an application dated August 10, 2012, under regulation 11(3) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (hereinafter referred to as "the Takeover Regulations"), seeking exemption from the applicability of regulation 3(2) and the requirement to make an open offer with respect to their proposed acquisition of shares and voting rights of the Target Company. In terms of the application : a) The promoters and promoter group of the Target Company consists of GMR Holdings Private Limited ("GHPL"), GVMR Trust, SBR Trust, GBSRSS Trust, GKKR Trust, GMR Infra Ventures LLP, Rajam Enterprises Private Limited, GMR Enterprises Private Limited, Mr. G. Mallikarjuna Rao, Mrs. G. Varalakshmi, Mr. Srinivas Bommidala, Mrs. B. Ramadevi, Mr. G.B.S.

Raju, Mrs. G. Satyavathi Smitha, Mr. G. Kiran Kumar and Mrs. G. Ragini. b) The Trusts (constituting part of the promoter group) are private family Trusts settled under separate deeds of settlement for the purpose of providing for the welfare and maintenance of the family of Mr. G. Mallikarjuna Rao consisting of his children, their spouses and their bloodline descendants ("the GMR family"). c) As on the date of the application, GHPL holds 2,73,62,21,862 equity shares of the Target Company constituting 70.30% of the equity share capital. The promoter and promoter group (including GHPL) of the Target Company together hold 71.43% of the equity share capital of the Target Company. d) The equity shares of GHPL are only held by Mr. G. Mallikarjuna Rao (99.997%) and Mrs. G. Varalakshmi (0.003%). It is proposed that 100% of the equity shares of GHPL held by Mr. G. Mallikarjuna Rao and Mrs. G. Varalakshmi ("the transferors") would be transferred by way of gift in the following manner : (i) 7,55,061 equity shares constituting approximately 25% of the paid up equity share capital of GHPL to each of the following Trusts – GVMR Trust, SBR Trust, GBSRSS Trust and GKKR Trust; and (ii) 3 shares to the GMR Family Fund Trust.

(All the aforesaid 5 Trusts would be collectively referred to as the Acquirers)

e) The transfer is proposed with the objective of giving effect to a family arrangement for the benefit of the members of the GMR family, whereby Mr. G. Mallikarjuna Rao, the patriarch of the GMR family and his wife Mrs. G. Varalakshmi intend to settle the shares of GHPL in the Trusts for the following purposes : (i) for the benefit of the GMR family and to provide for the welfare and well being of the members of the GMR family; (ii) to prescribe the manner of succession to, and the governance and control of, the business of the GMR family through the GMR family's shareholding in GHPL and indirectly in the Target Company; and (iii) to fulfill charitable and social responsibilities by dedicating a portion of the economic benefit for such purposes.

f) The transfer of 100% shareholding in GHPL to the proposed Acquirers would result in the Trusts (as represented by their Trustees) becoming the majority controlling shareholders of GHPL. While Mr. G. Mallikarjuna Rao and Mrs. G. Varalakshmi already hold 100% of the shares of GHPL in their personal capacities, the transfer of shares of GHPL to the proposed Acquirers would result in Mr. G. Mallikarjuna Rao and Mrs. G. Varalakshmi, together with their children and their spouses, holding the shares of GHPL in each of their capacities as Trustees of the Trusts.

g) As GHPL holds 70.30% of the shares and voting rights of the Target Company, the transfer of 100% of shares of GHPL to the Acquirers as trustees would result in the indirect acquisition of voting rights in the Target Company to the extent of 70.30% by the Acquirers in their capacity as trustees of the Trusts. Together with persons acting in concert (i.e. rest of the members of the promoter and promoter group of the Target Company) the Acquirers in their capacity as Trustees of the Trusts would directly and indirectly hold 71.43% of the voting rights of the Target Company. h) As on date of the application, the GVMR Trust, SBR Trust, GBSRSS Trust and GKKR Trust together hold 4000 equity shares of the Target Company constituting 0.0001% of the equity share capital of the Target Company and persons acting in concert with them hold more than 25% of the voting rights in the Target Company. Consequently, the proposed indirect acquisition would attract the provisions of regulation 3(2) of the Takeover Regulations and would be in excess of 5% of the voting rights of the Target Company.

3. The Acquirers have therefore sought exemption from the requirement to make a public announcement as a consequence of the aforesaid indirect acquisition of voting rights of the Target Company to the extent of 70.30% and 71.43% together with persons acting in concert. The exemption has been requested on the following grounds : (i) The indirect acquisition pursuant to the proposed settlement by way of gift is only an internal reorganisation of the shareholding of GHPL within the GMR family for the benefit of the members of the GMR family. The indirect acquisition would not be a commercial transaction. (ii) There will be no change of control or management of the Target Company pursuant to the proposed settlement by way of gift of shares of GHPL to the Acquirers. The Trustees of the Acquirers (the aforesaid five Trusts) through whom control is exercised over the assets of the Trusts, are promoters of the Target Company in their personal capacity (as specified in the shareholding pattern filed under clause 35 of the Listing Agreement as of March 31, 2012). They together with the transferors (including through GHPL) and persons acting in concert with them are in their personal capacity presently in joint control (directly and indirectly) of the Target Company.

(iii) The Trusts (the Acquirers) are also part of the promoter group and are jointly in control of the Target Company with their Trustees, the transferors and other persons acting in concert with them. Therefore, the Acquirers and their trustees are already in control of the Target Company together with the other transferors and there will consequently be no change in, or acquisition of, control or management of the Target Company pursuant to the proposed settlement by way of gift of shares to the Trusts. (iv) In any event, since the Trusts have been set up for the benefit of the members of the GMR family, the Trustees of the Acquirers will exercise control only as part of the GMR family. Therefore, regardless of whether the Acquirers exercise control in their personal capacity or as trustees, the GMR family would continue to be in control of the Target Company. (v) There will be no change in the promoter group of the Target Company pursuant to the proposed settlement by way of gift of shares of GHPL to the Trusts. The change in the identity of persons who will indirectly exercise voting rights over the Target Company through GHPL will only be between persons who, in their personal capacity, are promoters of the Target Company.

(vi) The indirect acquisition for which exemption is sought will not affect or prejudice the interests of the public shareholders of the Target Company in any manner. There will be no change of control, management, promoter group or shareholding of the Target Company pursuant to the proposed indirect acquisition.

4. The application also stated that Mr. G. Mallikarjuna Rao and Mrs. G. Varalakshmi are the trustees of the GVMR Trust. Mr. G. Mallikarjuna Rao, Mrs. G. Varalakshmi, Mr. Srinivas Bommidala, Mrs. B. Ramadevi, Mr. G.B.S. Raju, Mrs. G. Satyavathi Smitha, Mr. G. Kiran Kumar and Mrs. G. Ragini are the Trustees of the GMR Family Fund Trust. Mr. G. Mallikarjuna Rao, Mr. Srinivas Bommidala and Mrs. B. Ramadevi are the Trustees of the SBR Trust. Mr. G. Mallikarjuna Rao, Mr. G.B.S. Raju and Mrs. G. Satyavathi Smitha are the Trustees of the GBSRSS Trust. Mr. G. Mallikarjuna Rao, Mr. G. Kiran Kumar and Mrs. G. Ragini are the Trustees of the GKKR Trust. The Trusts, the Trustees (in their personal capacities), Mr. G. Mallikarjuna Rao and Mrs. G. Varalakshmi are all promoters of the Target Company, as named in the shareholding pattern filed with the stock exchanges under clause 35 of the listing agreement, and are in joint control (directly and indirectly) over the Target Company.

5. Pursuant to certain queries of SEBI, the Acquirers (through their representative) vide letter dated November 07, 2012 inter alia submitted that the beneficiaries of the different Trusts are primarily (i) the members of the family of Mr. G. Mallikarjuna Rao and Mrs. G. Varalakshmi (ii) certain other entities (companies and a foundation) under the ownership of certain members of the GMR family and (iii) the trustees of the Trusts. It was submitted that all the Trusts are non-determinate in nature with the beneficiaries and their shares not being fixed.

6. Subsequently, vide letter dated November 30, 2012, the Acquirers had undertaken that the beneficiaries of the Trusts shall at all times consist of only the members of the family of Mr. G. Mallikarjuna Rao and Mrs. G. Varalakshmi including their children, grandchildren and such other bloodline descendants and/or entities that are owned and controlled by any of the members of the GMR family. It was also undertaken that the beneficiaries of the Trusts shall, subject to the provisions of the concerned Trusts, at no time consist of any unrelated third person who is not a member of the GMR family or an entity that is not owned and controlled by members of the GMR family.

7. I have considered the application, the submissions/undertaking made in the subsequent correspondence from the Acquirers and other material available on record. Though, initially the Acquirers sought exemption from the applicability of regulation 3(2) of the Takeover Regulations with respect to their proposed transaction, the same was subsequently revised and vide an electronic mail dated June 18, 2013 from the counsel for the Acquirers, they have requested SEBI to apply regulation 3(1) instead of regulation 3(2). The application therefore stands modified to that extent.

8. As on date, the promoter and promoter group of the Target Company holds 71.43% of its equity. GHPL is a promoter entity which holds 70.30% out of the aforesaid 71.43%. The other shareholders in the promoter group are GVMR Trust, SBR Trust, GBSRSS Trust, GKKR Trust, GMR Infra Ventures LLP, Rajam Enterprises Private Limited, GMR Enterprises Private Limited, Mr. G. Mallikarjuna Rao, Mrs. G. Varalakshmi, Mr. Srinivas Bommidala, Mrs. B. Ramadevi, Mr. G.B.S. Raju, Mrs. G. Satyavathi Smitha, Mr. G. Kiran Kumar and Mrs. G. Ragini.

9. The shares of GHPL, a private limited company, are held by Mr. G. Mallikarjuna Rao (99.997%) and Mrs. G. Varalakshmi (0.003%). As part of the family arrangement for the benefit of the members of the GMR family, it has been proposed to transfer the shares of Mr. G. Mallikarjuna Rao and Mrs. G. Varalakshmi in GHPL to GVMR Trust, SBR Trust, GBSRSS Trust, GKKR Trust and the GMR Family Fund Trust. The proposed transfer of shares would be by way of gift to the aforesaid Trusts. The shareholding pattern of GHPL before and post such transfer is given below :

Shareholding in GHPL prior to the proposed transfer S. No. Name of the shareholder No. of shares held Percentage shareholding 1 Mr. G. Mallikarjuna Rao 30,20,147 99.997% 2 Mrs. G. Varalakshmi 100 0.003% Total 30,20,247 100%

Shareholding of GHPL post the proposed transfer S. No. Name of the shareholder No. of shares held Percentage shareholding 1 GVMR Trust 7,55,061 25% 2 SMR Trust 7,55,061 25% 3 GBSRSS Trust 7,55,061 25% 4 GKKR Trust 7,55,061 25% 5 GMR Family Fund Trust 3 0.00% Total 30,20,247 100%

10. The aforesaid five Trusts collectively would be indirectly acquiring 2,73,62,21,862 equity shares (70.30%) of the Target Company through the proposed transaction. I note that the GVMR Trust, SMR Trust, GBSRSS Trust and GKKR Trust together hold 4,000 shares constituting 0.001% shares/voting rights in the Target Company. The Trustees and the Trusts together hold shares constituting 0.10846% in the Target Company. Pursuant to the transfer of shares of GHPL (by way of gift) to the Acquirers, they would in addition to their respective shareholding/voting rights in the Target Company, would be able to exercise 70.301% shareholding/voting rights indirectly (through GHPL) in the Target Company.

11. I have perused the provisions of regulation 3 of the Takeover Regulations. I find that pursuant to the proposed transaction, the Trusts which presently hold 4,000 shares would collectively be able to exercise 70.30% voting rights through GHPL. Since the Trusts would be able to exercise more than 25% by virtue of their acquisition of the shareholding of GHPL, this increase would trigger the open offer requirements stipulated under regulation 3(1) of the Takeover Regulations. Unless exempted from the obligation, the Acquirers would be mandated to make a open offer as mandated under regulation 3(1) of the Takeover Regulations. The application has been submitted accordingly for seeking exemption.

12. As regards, GMR Family Fund Trust, I note from the submissions that its Trustees are Mr. G. Mallikarjuna Rao, Mrs. G. Varalakshmi, Mr. Srinivas Bommidala, Mrs. B. Ramadevi, Mr. G.B.S. Raju, Mrs. G. Satyavathi Smitha, Mr. G. Kiran Kumar and Mrs. G. Ragini, who are also part of the promoter and promoter group of the Target Company in their personal capacity. Pursuant to the proposed transfer, the Trustees (in their individual capacities) and the Acquirers would be exercising control over the Target Company through GHPL, which has 70.30% shareholding/voting rights in the Target Company. Instead of Mr. Mallikarjuna Rao and Mrs. G. Varalakshmi exercising their control over GHPL, it would, post the transfer of their shares, be the Trusts through their Trustees who would exercise the voting rights of GHPL in the Target Company. I also note that the proposed transfer of shareholding of shares of GHPL is not to any third parties but to private family Trusts, whose Trustees and beneficiaries are the family members of the GMR family and their bloodline descendants. I also note that the Acquirers had undertaken that the beneficiaries of the Trusts shall at all times consist of only the members of the family of Mr. G. Mallikarjuna Rao and Mrs. G. Varalakshmi including their children, grandchildren and such other bloodline descendants and / or entities that are owned and controlled by any of the members of the GMR family.

13. I also note that pursuant to the proposed transfer, there would be no change either in the shareholding of GHPL in the Target Company or in the shareholding pattern of the promoter and promoter group in the Target Company. It is only in the manner in which shares of GHPL (a promoter entity) are held which would change pursuant to the proposed transfer of shares of GHPL held by Mr. Mallikarjuna Rao and Mrs. G. Varalakshmi to the afore-mentioned Trusts (the Acquirers). I also note that there would be no change in the shareholding/voting rights of the public shareholders and that the proposed transaction would not in any manner affect their interests. Considering all such factors, I am of the view that the Acquirers could be exempted from the open offer obligations mandated under regulation 3(1) of the Takeover Regulations in respect of their proposed indirect acquisition of shares/voting rights of the Target Company.

14. 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 11(5) of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, hereby grant exemption to the Acquirers, namely, Grandhi Varalakshmi Mallikarjuna Rao Trust, Srinivas Bommidala and Ramadevi Trust, Grandhi Buchi Sanyasi Raju and Satyavathi Smitha Trust, Grandhi Kiran Kumar and Ragini Trust and the GMR Family Fund Trust from complying with the requirements of regulation 3(1) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 with respect to their proposed indirect acquisition of 273,62,21,862 (constituting 70.30%) equity shares (of face value 10/- each) of the target company, GMR Infrastructure Limited.

15. The exemption so granted is subject to the following conditions: a. The proposed acquisition shall be completed within 30 days from the date of this Order and the Acquirers shall file a report with SEBI in the manner provided in SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 within 21 days from the date of the acquisition. b. The statements/averments made or facts/figures given in the application and in the subsequent correspondence are true and correct to the best knowledge of the Acquirers. c. The Acquirers/Target Company shall ensure compliance with the statements, disclosures and undertakings made in the application and in their subsequent correspondence.

16. The exemption granted above is limited to the requirements of making open offer under regulation 3(1) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and shall not be construed as exemption from the disclosure requirements under Chapter V of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, the compliance with the SEBI (Prohibition of Insider Trading) Regulations, 1992, the Listing Agreement or any other applicable Acts, Rules and Regulations etc.

PRASHANT SARAN WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA Date : July 05, 2013 Place : Mumbai