Order in the matter of Marathon NextGen Realty Limited

WTM/PS/CFD/39/SEPT/2013 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM : PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under sections 11(1), 11(2)(j), 11(4) and 11B of the Securities and Exchange Board of India Act, 1992 read with section 12A of the Securities Contracts (Regulation) Act, 1956 in the matter of non-compliance with the requirement of minimum public shareholding by listed companies In respect of Marathon NextGen Realty Limited

1. Securities and Exchange Board of India (hereinafter referred to as "SEBI") had passed an interim order dated June 04, 2013 (hereinafter referred to as "the interim order ") with respect to 105 listed companies who did not comply with the Minimum Public Shareholding ("MPS") norms as stipulated under rules 19(2)(b) and 19A of the Securities Contracts (Regulation) Rules, 1957 (hereinafter referred to as "SCRR") within the due date i.e., June 03, 2013. The interim order was passed without prejudice to the right of SEBI to take any other action, against the non-compliant companies, their promoters and/or directors or issuing such directions in accordance with law. The interim order was to be treated as a show cause notice by those companies for action contemplated in paragraph 18 thereof.

2. Marathon NextGen Realty Limited (hereinafter referred to as "the Company") is one such company against whom the interim order was passed. The equity shares of the Company are listed on the Bombay Stock Exchange Limited ("BSE").

3. The Company filed its replies to the interim order vide letters dated June 17, 2013 and July 17, 2013. An opportunity of personal hearing was afforded to the Company on August 06, 2013, when Mr. Chetan Shah (Chairman and Managing Director), Mr. Raghavan (Company Secretary), Mr. Ramamurthy (Director) and Mr. Sumit Pachisa (AVP, ICICI Securities Limited) appeared on behalf of the Company and made submissions. The representatives inter alia submitted that – (i) the promoters of the Company had successfully undertaken an Offer for Sale ("OFS") on July 16, 2013, wherein 26,81,212 equity shares (14.142%) were sold.

(ii) pursuant to the OFS, the minimum public shareholding of 25% was achieved by the Company; (iii) the promoters had a predicament on the valuation of the shares proposed to be diluted and the potential "loss of wealth" to them and that the realty sector was passing through a 'rough patch' and the revenues were drastically hit; (iv) the dilution of the promoters' stake in the OFS was done at "sub-book value". The representatives requested SEBI to vacate the interim directions issued against the Company, its promoters and directors, as the Company had compliant with the MPS norms.

4. I have considered the replies and the submissions made by the Company. The Company has submitted that it has complied with the MPS norms by off-loading a portion of its promoters' shareholding through an OFS on July 16, 2013. In this regard, I have perused the filings made by the Company in BSE with respect to its shareholding pattern (made as on July 19, 2013) and note that the shareholding of the public shareholders in the Company is at the stipulated minimum level of 25%. According to the amended rule 19A of the SCRR, a listed company (except a listed public sector company) shall maintain public shareholding of at least 25% and if the holding was lower than that as on June 04, 2010, such company was required to increase the public shareholding to atleast 25% within a period of three years from June 04, 2010, in the manner specified by SEBI. The Company has achieved compliance with the MPS norms belatedly on July 16, 2013. Therefore, the Company was non-compliant with the MPS norms as on June 03, 2013 (the due date for compliance).

5. As regards the submission that the promoters had a predicament about the valuation of shares and that in the OFS, shares were offloaded at a price lower than the book value, I find that the amendments to rules 19(2)(b) and 19A were effected in order to have atleast a minimum level (at 25%) of public participation in a listed entity. The percentages mentioned therein were the minimum level of public shareholding to be maintained by a listed company. I also note that OFS was not the only means for achieving compliance with the MPS norms. Therefore, such submissions made by the Company/its promoters do not carry any merit for justifying the delay caused in complying with the MPS norms.

6. The Company has definitely delayed in complying with the MPS requirements under the SCRR, even when it was under notice for three years for achieving such compliance. The Company is, therefore, warned for the same and is advised to ensure compliance with all the applicable laws and regulations administered by SEBI that govern its activities in the securities market. Considering the fact that the Company is now compliant with the stipulated minimum public shareholding level, I do not propose to initiate further action against the Company, its directors, promoters and promoter group, as contemplated in paragraph 18 of the interim order.

7. 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 sections 11(1), 11(2)(j), 11(4) and 11B thereof and section 12A of the Securities Contracts (Regulation) Act, 1956, hereby revoke the directions issued vide the interim order dated June 04, 2013 against the company, Marathon NextGen Realty Limited, its directors, promoters and promoter group, with immediate effect.

8. Copy of this Order shall be served on the stock exchanges and depositories for their information and action that may deem fit and necessary in this case.

PRASHANT SARAN WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA

Date : September 04, 2013 Place : Mumbai