Order in the matter of non-complaince with the requirement of MPS by listed companies in respect of Tata Teleservices (Maharashtra) Limited

WTM/PS/38/CFD/SEPT/2013 BEFORE THE SECURITIES AND EXCHANGE BOARD OF INDIA CORAM : PRASHANT SARAN, WHOLE TIME MEMBER ORDER Under Section 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 Tata Teleservices (Maharashtra) Limited 1. Securities and Exchange Board of India (hereinafter referred to as 'SEBI') 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. Tata Teleservices (Maharashtra) Limited (hereinafter referred to as 'the Company') is one such company against whom the interim order was passed. The public shareholding in the Company on the date of the interim order was 22.79%. The shares of the Company are listed on the Bombay Stock Exchange Limited ('BSE') and the National Stock Exchange of India Limited ('NSE').

3. The Company filed its replies dated June 24, 2013, July 03, 2013 and August 20, 2013 to the interim order. Thereafter, an opportunity of personal hearing was afforded to the Company on August 22, 2013, when Mr. Bhaskar Chandran, President - Legal and Mr. S.G. Murli, Executive President & CFO of the Company appeared and made submissions. Mr. Eruch N. Kapadia, Vice President, Tata Sons Limited and Ms. Sandhya Kudtarkar, Vice President - Legal, Tata Services Limited were also present during the personal hearing and made submissions on behalf of Tata Sons Limited (one of the promoters of the Company).

4. I have considered the replies of the Company and the submissions made in the personal hearing. The Company has submitted that it has undertaken a bonus issue of equity shares to the public shareholders and has allotted 5,77,30,873 equity shares of `.10 each on August 10, 2013 for the purposes of complying with the MPS norms. Consequently, the promoter holding was reduced from 77.21% to 74.90%. During the personal hearing, the representatives also submitted that the Company is now compliant with the MPS norms and requested SEBI to withdraw the directions issued in paragraph 17 of the interim order.

5. I have considered the reply and submissions made by the Company. The Company has submitted that it had examined various methods to comply with the MPS norms, starting from Offer for Sale (OFS) and sale of shares by the promoter and promoter group entities of the Company on the floor of the stock exchanges in the normal window after obtaining SEBI approval. It has been submitted by the Company that Tata Sons, one of the promoters of the Company had initiated the OFS on May 15, 2013. However, due to the poor response, the OFS was cancelled. Thereafter, on May 30, 2013, a second OFS was initiated and all valid bids aggregating to 68,771 shares of the Company were accepted. Simultaneously, Tata Sons sold about 9.8 million equity shares representing 0.52% of the share capital of the Company till June 03, 2013 on the floor of the exchanges. It has been said that due to the poor market response to both the OFSs, the Company considered the sale on the floor of the stock exchange as a feasible method for reducing the promoter holding. The company has submitted that the sale on the floor of exchange hampered by the generally low volumes in its stocks possibly due to low investor appetite in the telecom sector. Further, while Tata Sons was in the process of selling the shares on the floor of exchange, its brokers received a communication from NSE on June 05, 2013, directing them not to execute sale of the Company's shares. Accordingly, the sale on the floor of the stock exchange was discontinued since June 06, 2013. Thereafter, the Company decided to proceed with the issue of bonus shares, where the promoter and promoter group entities had foregone their entitlement. Accordingly, the Company immediately took requisite steps and completed the allotment pursuant to the bonus issue to the eligible shareholders.

6. I note that the Company has achieved the minimum public shareholding level as stipulated under the SCRR on August 10, 2013. I note that the Company has achieved the compliance through the issue of bonus shares. The public shareholders now hold 25.10% in the Company. From the aforesaid discussion, it is clear that the Company did not comply with the MPS requirements on or before June 03, 2013, i.e., the prescribed due date. It was submitted that in order to become MPS compliant, the Company had explored various fund raising exercises but could not proceed with any of the initiatives given the poor sentiments on the stock/ industry. I note that the promoters had come out with the first OFS only on May 15, 2013, to achieve compliance. The Company vide its letters has provided the detailed explanation for the delay. Having gone through the same, I note that the Company had started taking effective steps for compliance only from May, 2013. If it had taken those steps much earlier, it could have avoided the delay. The Company has definitely delayed its compliance with the MPS requirement when it was under notice for three years for achieving such compliance. Therefore, the Company is warned for its conduct and is advised to ensure compliance with all the applicable laws and regulations administered by SEBI, in letter and spirit. However, considering the fact that the Company has complied with the MPS norms, though belatedly, as observed above, I do not propose to initiate further action against the Company as contemplated in paragraph 18 of the interim order.

7. With the above observations, 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 vide the interim order dated June 04, 2013 against the Company, Tata Teleservices (Maharashtra) 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.

PLACE: Mumbai PRASHANT SARAN DATE: September 04th, 2013 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA