Order in the matter of M/s. Pacific Cotspin Limited- Exemption under Takeover Panel

1.1 Pacific Cotspin Limited (hereinafter referred to as the target company) is a company incorporated under the Companies Act, 1956, having its registered office at Falta Industrial Growth Centre, Sector–IV, Falta, South 24 Parganas, West Bengal. The equity shares of the target company are listed on the Bombay Stock Exchange Limited.

2.0 APPLICATION FOR EXEMPTION

2.1 Vide letter dated January 4, 2010, Mr. Chandra Prakash Mehra, on his behalf and on behalf of Mr. Ashok Mehra (hereinafter collectively referred to as the acquirers) 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) to the Securities and Exchange Board of India (hereinafter referred to as SEBI). In the application, it was stated that the acquirers belong to the promoter group and currently hold 44,52,732 equity shares of Rs. 10/- each constituting 18.063% of the paid up capital and 17.80% of the voting capital of the target company. It was stated that as per the restructuring proposal approved, vide letter dated June 29, 2009, under the Corporate Debt Restructuring Package (hereinafter referred to as CDR Package), the existing preference share capital of Rs. 11.42 crore, brought in by the promoters during 2006 were to be converted into equity and that the promoters were to bring in Rs. 2.78 crore as equity in phases representing 36% of the expanded capital, in the following manner:

i. Conversion of 11,42,440 Non-cumulative Redeemable Preference Shares of Rs. 100/- each into 1, 14, 24,400 equity shares of Rs.10/- each constituting 29.40% of the expanded share capital and 29.13% of the voting capital of the company allotted to the promoters. ii. 27,80,000 equity shares of Rs.10/- each constituting 7.15% of the expanded capital of the company to be allotted to the acquirers on preferential basis towards Rs. 2.78 Crore to be brought in by the promoters on a phased manner.

2.2 It was further stated that, pursuant to the allotment of equity shares, as per the CDR Package, the shareholding of promoter group (including the holding of the acquirers) would increase from 18.07% to 48.02% of the equity share capital and 17.81% to 47.59% of the voting rights of the target company. In view of the above, the acquirers filed the present application seeking exemption from the applicability of Regulation 11(1) of the Takeover Regulations with respect to the proposed acquisition of 1,42,04,400 [1,14,24,400 (on conversion of preference shares)+27,80,000 (on preferential allotment)] equity shares of the target company constituting 36.55% of the expanded capital of the target company, inter alia on the ground that the acquirers/promoters are not acquiring any shares in the target company and that the increase in the shareholding is due to the restructuring as permitted by the CDR Package.

2.3 Thereafter, vide letter dated January 22, 2010, Mr. Chandra Prakash Mehra informed the details of the shares to be allotted pursuant to the CDR Package. In terms of the said letter, the acquirers are proposed to be allotted 1,42,04,400 shares of the target company. The said letter also enclosed a copy of the special resolution passed in the Annual General Meeting held on September 30, 2009, wherein it was inter alia disclosed “…..the consent of the Company be and is hereby accorded to the Board in terms of the Restructuring under the CDR Mechanism as approved by the CDR Cell and as minuted by the monitoring committee of CDR Empowered group”

3.0 RECOMMENDATION OF THE TAKEOVER PANEL

3.1 The aforesaid application was forwarded to the Takeover Panel in terms of Regulation 4(4) of the Takeover Regulations and the Takeover Panel, vide report dated February 8, 2010 has recommended as under:

“The panel observed that the proposed acquisition of equity shares by the promoters is pursuant to the CDR Scheme and the said proposal has also been approved by the shareholders of the Company. Considering the fact that the proposed acquisition of equity shares by the promoters would be in the interest of the Company and its shareholders, the panel recommended the grant of exemption from the compliance of regulation 11(1) of the SEBI (SAST) Regulations.”

3.2 Subsequent to the Panel recommendation, the target company filed various information/document, vide letters dated February 11, 2010, February 16, 2010, March 15, 2010, March 25, 2010 and March 30, 2010 as sought by SEBI. The target company, vide letter dated March 30, 2010, filed the shareholding pattern. The shareholding pattern of the target company and the voting rights in the target company are given below:

Category Number of Before the proposed acquisition After the proposed acquisition registered shareholders as on date of application No. of shares/ total % of Shares/ No. of shares/ % of Shares/ voting rights held %voting capital held total voting %voting capital rights held held Promoter group 4454132/ 4454132 18.069/17.81 18658532/ 48.02/47.59 (including 7 18658532 Acquirers) Acquirers 4452732/ 18.063/17.80 18657132/ 48.02/47.58 2 18657132 4452732 FIs/Banks 240792/ 0.977/ 0.96 240792 /240792 0.62/ 0.61 3 240792 FIIs/ NRIs/ 264412/ 1.073/ 1.06 264412 / 0.68/ 0.67 81 OCBs

264412 264412 Public * 19691064/ 78.73/80.17 19691064/ 50.21/51.13 10484 20051798 19691064 Total 10491 24650400/ 100.00/100.00 38854800/ 100.00/100.00 25011134 39215534 * The voting rights of Public includes 3,60,734 CRPSs (Cumulative Redeemable Preference Shares) were issued to public shareholders of the target company pursuant to the scheme of amalgamation of the target company with Salem Vanijya Private Limited and they have accrued 1.44 % voting capital of the target company due to operation of section 87(2)(b) of the Companies Act, 1956 since January 4, 2008.

4.0 FINDINGS:

4.1 I have carefully considered the application dated January 4, 2010, the subsequent information/documents filed by the target company/acquirers, the recommendation of the Takeover Panel and other material available on record.

4.2 I note from the terms and conditions of the CDR Package, the existing preference share capital of Rs.11.42 Crores, brought in during 2006 by the promoters, is to be converted into equity shares. Further, the promoters of the target company are to bring in equity capital of Rs.2.78 Crores in phases. I further note that pursuant to the restructuring under the CDR Package, the promoters’ (including the acquirers) shareholding would increase from 18.07% to 48.02%.

4.3 Pursuant to the proposed acquisition, the shareholding of the promoter group (including the acquirers) in equity share capital would increase to 48.02 % and the stake in voting capital would increase to 47.59% (from 17.81%). I also note that there would not be any change in control pursuant to the proposed preferential allotment as the acquirer being the part of the promoter group is already in control of the target company. I further note that the proposed allotment of shares was already approved by the shareholders of the target company at their Annual General Meeting held on September 30, 2009. Even after the proposed acquisition, the minimum public shareholding requirement specified in Clause 40A of the Listing Agreement would not be breached.

4. 4 In view of the above, I agree with the recommendations of the takeover panel and consider the present case as a fit case for granting exemption to the acquirers/promoters from complying with the provisions of Regulation 11(1) of the Takeover Regulations.

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, namely Mr. Ashok Mehra and Mr. Chandra Prakash Mehra 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 regard to the proposed acquisition of 1,42, 04,400 shares at a price of Rs. 10/- per share of the target company, Pacific Cotspin Limited. 5.2 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/target company shall ensure compliance with the statements, disclosures and undertakings made in the application and subsequent letters. (c) In respect of the proposed preferential allotment, the relevant norms including the norms regarding the pricing specified in Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009 shall be observed and complied with. (d) There shall be no reduction in the minimum level of public shareholding pursuant to the proposed preferential allotment and that the target company shall maintain the minimum level of public shareholding, as required in terms of the listing agreement.

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. 5.4 The acquirers shall file a report with Securities and Exchange Board of India confirming compliance including the conditions specified in this order.

DR. K. M. ABRAHAM WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA PLACE: MUMBAI DATE: APRIL 21, 2010