Order in the matter of Jindal Poly films Limited

1. Jindal Poly Films Limited (hereinafter referred to as the target company) is a company incorporated under the Companies Act, 1956 having its registered office at 19th K.M., Hapur-Bulandshahr Road, P.O. Gulaothi, Distt. Bulandshahar, Uttar Pradesh. The equity shares of the target company are listed on the National Stock Exchange of India Limited (hereinafter referred to as NSE) and the Bombay Stock Exchange Limited (hereinafter referred to as BSE).

2. Jindal Photo Investments Limited on behalf of all the promoters of the target company, vide letter dated February 4, 2010, filed an application under Regulation 4(2) read with Regulation 3(1)(l) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the Takeover Regulations) with the Securities and Exchange Board of India (hereinafter referred to as SEBI). It is stated in the said application that Jindal Photo Investments Limited, along with persons acting in concert namely, Soyuz Trading Co. Limited, Consolidated Photo Finvest Limited, Consolidated Finvest and Holding Limited, Mr. Shyam Sunder Jindal and Rishi Trading Co. Limited are the promotes (collectively hereinafter referred to as the acquirers) of the target company. As per the application, the acquirers are holding 1,55,09,326 shares representing 67.37% of the total equity share capital of the target company. It is further stated that the Board of Directors of the target company, on January 20, 2010, approved buy-back of a maximum of 22,00,000 equity shares at a price not exceeding Rs 450/- per share and the same would be limited to Rs.99,00,00,000/- being less than 25% of the paid up capital and free reserves of the target company. It is also stated that a resolution through postal ballot had been passed by the shareholders of the target company on March 8, 2010 authorizing the proposed buy-back. Since the proposed buy-back would increase the voting rights of the promoter group from 67.37% to 74.49% (assuming 100% response to the said buy-back), which would consequently trigger Regulation 11(2) of the Takeover Regulations, the aforesaid application is filed seeking exemption from complying with the requirements of the aforesaid provision inter alia on the following grounds:

a) Increase in voting rights of the acquirers is incidental to the buy-back proposal of the target company and is not an active acquisition. b) There is no acquisition of any shares of the target company by the acquirers. There would be no change in control of the target company consequent to increase in voting rights, as the acquirers are already holding 67.37% of its share capital. c) Even after the proposed buy-back, the voting rights of the acquirers would not exceed the maximum level of 75%, which meets the requirement of the listing agreement stipulation. d) The maximum proposed buy-back price is at Rs.450 per share and is higher than the book value of Rs.422.70 per shares as on March 31, 2009.

e) The acquirers do not propose to acquire a single share of the target company nor would they tender their shares in the buy-back. f) The proposed buy-back is to enhance earnings per share and create “long-term shareholders’ value” and would also provide an exit opportunity to the investors who wish to do so.

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

Shareholders Category No of Shares/ % of Shares/ No of Shares/ % of Shares/ total voting total voting total voting total voting rights held rights held rights held rights held

Promoter Group 15,509,326 67.37 15,509,326 74.49 FIs/ Banks 3,147,406 13.67 5,311812 25.51 FIIs/ NRIs/ OCBs 1,938,940 8.42 Other Public 2,425,466 10.54 Total 23,021,138 100 20,821,138 100

4. Thereafter, SEBI sought clarification/information with respect to the aforesaid application and the same was submitted by the acquirers, vide letters dated March 9, 2010 and March 19, 2010. Thereafter, the application was forwarded by SEBI to the Takeover Panel in terms of Regulation 4(4) of the Takeover Regulations. The Takeover Panel, vide report dated March 27, 2010 returned the application to SEBI with an advice to obtain additional information/clarification from the acquirers. Subsequently, the acquirer filed certain details, vide letters dated March 31, 2010 and May 10, 2010. The application along with the letters received from the acquirers was thereafter forwarded to the Takeover Panel. The Takeover Panel, vide report dated May 24, 2010 has recommended as under– “The panel observed that even after the completion of the buyback the public shareholding will remain above 25%. Further, the proposed buyback, which is at a price higher than the book value, would give an exit opportunity to the shareholders who wish to do so. Considering the aforesaid factors as also the fact that the proposed buyback will enhance the earning per share and create long term shareholders value, the panel recommended exemption to the acquirers from the applicability of regulation 11(2) of the Takeover Regulations subject to the Target Company/acquirers complying with the relevant provisions of the Companies Act, 1956, SEBI Regulations and Listing agreement. ………………………….The panel observed that since the subsequent buyback was approved by the Target Company’s board within 365 days from the pervious buyback offer, the same deserves to be examined (if not already examined) by SEBI as to whether the subsequent buyback was violative of section 77A(2) of the Companies Act, 1956 in terms of which no offer of buyback shall be made within a period of 365 days reckoned from the date of the preceding offer of buyback” 5. Thereafter, an opportunity of a personal hearing was granted to the acquirers on July 1, 2010. Mr. Sunit Maheshwari and Mr. Vasdev Aggarwal, as authorized by the target company appeared before me and made submissions. Mr. Subodh Gupta from Motilal Oswal Investment Advisors Private Limited was also present during the hearing.

6. I have considered the application dated February 4, 2010, the subsequent details/information filed by the acquirers, the recommendation of the Takeover Panel, the oral submissions made in support of the application and other relevant material available on record. I observe from the instant application that the proposed buy-back would increase the shareholding/voting rights of the acquirers from 67.37% to 74.49% (assuming 100% response to the buy-back) and would consequently trigger Regulation 11(2) of the Takeover Regulations. I also observe that within a span of two years, this is the third buy-back which is being offered by the target company. The Takeover Panel in its Report dated May 24, 2010 had advised SEBI to examine whether the present buy-back was in compliance with the provisions of Section 77A (2) of the Companies Act, 1956. In this respect, I note that the first buy-back of equity shares was made during the period between December 28, 2008 and April 30, 2009 for a price not exceeding Rs.350/- per equity share, for an aggregate amount not exceeding Rs.150,00,00,000/-. The said buy-back was made under Section 77A(2)(b) of the Companies Act, 1956, pursuant to a special resolution passed by the shareholders of the target company by way of postal ballot on August 28, 2008. In view of the expected increase in their shareholding/voting rights in the target company from 55.21% to 73.60%, consequent to the said buy-back, the acquirers had filed an application seeking exemption from the applicability of the provisions of Regulation 11(2), which was granted by SEBI vide Order dated November 24, 2008. Pursuant to the said buy-back, the holding of the acquirers in the target company had actually increased to 62.38% from 55.21%.

(i.e. increase of 7.18%). Thereafter, another buy-back of equity shares was made during the period between August 1, 2009 and December 17, 2009 for a maximum price of Rs.400/- per share. The acquirers did not seek any exemption in respect of the said increase, in view of the second proviso to Regulation 11(2) of the Takeover Regulations. Pursuant to the said buy-back, the acquirers’ actual holding increased from 62.38% to 67.37%. The third i.e, the present buy-back has been approved by the shareholders again through a special resolution by way of postal ballot on March 8, 2010. The proposed buy-back would increase the acquirers holding from 67.37% to 74.49%, an increase by 7.12%. In this regard, I note that the restriction imposed in terms of the second proviso to Section 77A(2)(b) of the Companies Act, 1956, would be applicable to an offer of buy-back made within a period of three hundred and sixty five days reckoned from the date of the preceding offer of buy-back. For the purposes of the said proviso, the expression “offer of buy-back” means the offer of such buy-back made in pursuance of the resolution of the Board referred to in the first proviso to the aforesaid provision.

As the present buy-back has been authorized by a special resolution passed by the shareholders, the second proviso to Section 77A(2)(b) of the Companies Act, 1956 would not be applicable.

7. I also note that even after the completion of the present buy-back and assuming that the same would get 100% response from the shareholders of the target company, the public shareholding would remain above 25% as required under the listing agreement. Further, the proposed buy-back, which is at a price higher than the book value would give an exit opportunity to the shareholders, who wish to do so. I also note that SEBI, vide order dated November 24, 2008 (as stated above) had already granted exemption to the promoter group of the target company in respect of the incidental increase in the shareholding and voting rights from 55.21% to 73.60% (incase of 100% response), pursuant to the first buy-back offer by the target company. Pursuant to the said buy-back, the acquirers’ holding had actually increased to 62.38% from 55.21%. Considering the facts and circumstances, I agree with the recommendations of the Takeover Panel and grant exemption to the acquirer from the applicability of Regulation 11(2) of the Takeover Regulations, pursuant to the present buy-back offer of the target company, subject to the target company/acquirers complying with relevant provisions of the Companies Act, 1956, SEBI Regulations and Listing agreement. I note that the target company had twice offered (before the present one) to buy-back its securities and consequentially the holding of the promoter group had also increased. The present buy-back offer would also increase their holding, as stated above in this order. Repeated buy-back offers by the target company is not something that SEBI as a Regulator would like to encourage.

8. 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 Jindal Photo Investments Limited, along with persons acting in concert namely, Soyuz Trading Co. Limited, Consolidated Photo Finvest Limited, Consolidated Finvest and Holding Limited, Mr. Shyam Sunder Jindal and Rishi Trading Co. Limited, the promoters of the target company, Jindal Poly Films Limited from complying with the provisions of Regulation 11(2) thereof with respect to their increase in shareholding and voting rights from 67.37% to 74.49% consequent upon the proposed buy-back of equity shares by the target company.

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

(a) The statements/averments made/facts or figures given in the application are true and correct to the best knowledge of the acquirers. (b) The acquirers along with others in promoter group, shall ensure compliance with the statements, disclosures and undertakings made in the application. (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, the proposed buy-back, the Listing Agreement and other applicable laws.

10. The acquirers are further advised not to seek any further exemption pursuant to any further buy-back offer by the target company, for the reasons stated above in this Order.

11. 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.

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

PLACE: MUMBAI DATE: AUGUST 10, 2010