Order in the matter of Panacea Biotec Limited

1.0 BACKGROUND 1.1 Panacea Biotec Limited (hereinafter referred to as the target company) is a company incorporated under the Companies Act, 1956 having its Registered Office at Ambala- Chandigarh Highway, Lalru- 140501, Punjab. The equity shares of the target company are listed on the Bombay Stock Exchange Limited (hereinafter referred to as BSE) and National Stock Exchange of India Limited (hereinafter referred to as NSE).

2.0 APPLICATION SEEKING GRANT OF EXEMPTION

2.1 SPA Merchant Bankers Limited (hereinafter referred to as the Merchant Banker), vide letter dated April 5, 2010 forwarded an application from Mr. Ravinder Jain on behalf of the promoter group of the target company namely, Mr.Soshil Kumar Jain, Mr.Ravinder Jain, Mr.Rajesh Jain, Mr.Sandeep Jain, Ms. Nirmala Jain, Ms. Sunanda Jain, Ms. Meena Jain, Ms. Pamilla Jain, Soshil Kumar Jain (HUF), Ravinder Jain (HUF), Rajesh Jain (HUF), Sandeep Jain (HUF), Mr. Ankesh Jain, Mr. Harshet Jain, Mr. Nipun Jain, Ms. Priyanka Jain, Ms. Radhika jain, Mr. Sumit Jain, Mr. Abhey Kumar Jain, Mr. Anu Jain, Mr. Ashish Jain, Ms. Kanta Rani, First Lurce Partnership Co and Second Lurce Partnership Co (hereinafter collectively referred to as the acquirers), under Regulation 4(2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the Takeover Regulations) read with Regulation 3(1)(l) thereof, to Securities and Exchange Board of India (hereinafter referred to as SEBI). It is stated that the acquirers belong to the promoter group of the target company and currently hold 68.73% of the paid up capital of the target company. It is further stated that the target company proposes to buyback a maximum of 55,92,000 equity shares from open market through stock exchanges at a price not exceeding Rs. 229/- per share. As the proposed buy back would increase the shareholding of the promoter group from 68.73% to 74.99% (assuming 100% response to the buy back) and would trigger Regulation 11(2) of the Takeover Regulations, the aforesaid application is filed seeking exemption from the requirements of the Takeover Regulations, inter alia on the following grounds:

a. The increase in the percentage of shareholding of the acquirers is merely incidental to the buy-back proposal. b. Even after the buy-back and assuming 100% response, the public shareholding in the target company would remain at a level higher than 25%, which is more than the minimum stipulated public shareholding specified in clause 40A of the listing agreement. c. There would be no change in control over the target company as the acquirers are already in control. d. The acquirers do not have any intention to participate in the buyback offer and that they do not propose to acquire, by way of purchase, any shares of the target company. e. The proposed buy back will enhance shareholders value and provide exit option to those who desire to exit from the target company. f. The maximum offer price of the proposed buy back is Rs.229/- per share which is higher than the book value of Rs.92.10/- per share as on March 31, 2009 and minimum price of Rs. 210.08/- computed as per the pricing formula laid down in the Takeover Regulations.

2.2 Thereafter, vide letter dated April 21, 2010, the target company submitted that its promoters/acquirers alongwith the persons acting in concert were holding 4,35,94,458 equity shares of the target company representing 65.22% of its total share capital as on September 30, 2008. It was further submitted that, pursuant to the SEBI Circular dated October 30, 2008, the promoters/acquirers alongwith the persons acting in concert have acquired 23,57,709 equity shares of the target company, representing 3.53% of its total share capital, through open market purchase in normal segment on the stock exchange. According to the target company, the current shareholding of the promoters/acquires alongwith the persons acting in concert is 4,59,37,834 equity shares of the target company representing 68.73% of its total share capital. Thereafter, vide letter dated May 6, 2010, the Merchant Banker submitted the details of the acquisition of 23,57,709 (3.53%) equity shares of the target company by the promoters/acquirers along with the persons acting in concert.

2.3 The shareholding pattern of the target company (before and after the proposed buy back) as per the aforesaid application is as under:-

Before the proposed Shareholders Category Buyback After the Proposed Buyback Number of Number of % of Number of % of shares/voting Registered shares/Total shares/total shares rights shareholders voting rights voting as on Held capital held 5.4.2010

Promoter Group (Acquirers) 24 4,59,37,834 68.73 4,59,37,834 74.99 FIs/Banks 2 34,884 0.05 1,53,12,912 25.01

FIIs/NRIs/OCBs 206 96,00,843 14.32

Public 8718 1,12,69,185 16.90 Total 8950 6,68,42,746 100 6,12,50,746 100

3.0 RECOMMENDATION OF THE TAKEOVER PANEL

3.1 The aforesaid 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 May 24,2010 has recommended as under:

“The panel observed that the public shareholding in the Target Company will remain at level above 25% even after the proposed buyback of the equity shares of the Target Company (in case of 100% response) and the offer price of the proposed buyback is Rs.229/- per share which is higher than the book value of Rs.92.10 per share. Further, the panel felt that the proposed buyback will enhance shareholders value and provide exit option to those who desire to exit from the Company. Considering all these factors, the panel recommended exemption to the acquirers from the applicability of regulation 11(2) of the Takeover Regulations subject to the Target Company/acquires complying with the relevant provisions of the Companies Act, 1956, SEBI Regulations and Listing Agreement”.

4.0 FINDINGS

4.1 I have considered the application dated April 5, 2010, the subsequent information provided on behalf of the acquirers, the recommendation of the Takeover Panel and other relevant material available on record.

4.2 In terms of the application, the target company proposes to buy-back a maximum of 55,92,000 equity shares from the open market through stock exchanges at a price not exceeding Rs.229/- per share. The buy-back would result in an increase in the shareholding of the acquirers from 68.73% to 74.99% i.e., an increase by 6.26%. The same would trigger Regulation 11(2) of the Takeover Regulations. In terms of the application, there is no direct acquisition of any equity shares/voting rights of the target company by the acquirers. The said increase would be incidental to the buy-back proposal of the target company. As on date, the acquirers are holding 68.73% of the total share capital/voting rights in the target company and are in control. It is also submitted that there would not be any change in control in the target company, even after the proposed buy-back. I also note that the buy-back is being proposed in keeping with the target company’s intent to enhance overall shareholder’s value. The said buy-back would lead to a reduction in the outstanding number of equity shares. Further, even after the proposed buy-back of the equity shares by the target company (even in case of 100% response), the public shareholding in the target company would remain at 25.01% which is above the minimum requirement of 25%, as specified in Clause 40A of the Listing Agreement.

The Takeover Panel had also observed that the proposed buy-back would enhance shareholders value and provide exit option to those who desire to exit from the target company and had recommended the grant of exemption to the acquirers. However, I also note that, in terms of the second proviso to Regulation 11(2) of the Takeover Regulations [inserted with effect from October 30,2008] of the Takeover Regulations, an acquirer (together with persons acting in concert with him), holding 55% or more but less than 75% of shares or voting rights in a target company, may acquire additional shares or voting rights entitling him to five percent of the voting rights in a target company without making a public announcement, if the increase in the shareholding or voting rights of the acquirer is pursuant to a buy-back of shares by the target company In the present case, the buy-back of the equity shares by the target company (in case of 100% response) would result in the increase of the shareholding of the acquirers in the target company by 6.26%. In terms of the second proviso to Regulation 11(2) of the Takeover Regulations, the acquires are entitled to acquire additional shares or voting rights which entitle them to exercise upto 5% of the voting rights in the target company without making a public announcement.

From the additional information submitted by the target company and the Merchant Banker, I note that the acquirers along with the persons acting in concert were holding shares representing 65.22% of the total share capital as on September 30, 2008. Thereafter, pursuant to the SEBI Circular dated October 30, 2008, the promoters/acquirers alongwith the persons acting in concert have acquired 23,57,709 equity shares of the target company, representing 3.53% of its total share capital, thereby availing the creeping acquisition benefit to the extent of 3.53% during November 9, 2008 to March 13, 2010. Further, SEBI vide circular dated August 6, 2009, clarified that the aforesaid 5% limit [provided under second proviso to Regulation 11(2)] can be availed in one or more tranches, without any restriction on the time-frame within which the shares can be acquired. The present application is in respect of the increase of 6.26%, pursuant to the proposed buy back. As the acquirers have availed the creeping benefit of 3.53% in terms of second proviso to Regulation 11(2) of the Takeover Regulations and that 1.47% remains unutilized, I am of the view that, in the present case, the exemption needs to be granted only in respect of the balance 4.79% (6.26% - 1.47%).

4.3 I note that the Takeover Panel has recommended exemption to the acquirers from the applicability of Regulation 11(2) of the Takeover Regulations. However, considering the facts and circumstances of the case as stated above, I am of the view that the acquirers in the present case be exempted from complying with the provisions of Regulation 11(2) of the Takeover Regulations in respect of 4.79 % increase in shareholding/voting rights, as mentioned above. In view of the above, the acquirers would not be eligible to avail the benefit in terms of second proviso to Regulation 11(2) of the Takeover Regulation, in future.

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.Ravinder Jain, Mr.Soshil Kumar Jain, Mr.Rajesh Jain, Mr.Sandeep Jain, Ms. Nirmala Jain, Ms. Sunanda Jain, Ms. Meena Jain, Ms. Pamilla Jain, Soshil Kumar Jain (HUF), Ravinder Jain (HUF), Rajesh Jain (HUF), Sandeep Jain (HUF), Mr. Ankesh Jain, Mr. Harshet Jain, Mr. Nipun Jain, Ms. Priyanka Jain, Ms. Radhika jain, Mr. Sumit Jain, Mr. Abhey Kumar Jain, Mr. Anu Jain, Mr. Ashish Jain, Ms. Kanta Rani, First Lurce Partnership Co. and Second Lurce Partnership Co., from complying with the provisions of Regulation 11(2) thereof, with respect to their increase in voting rights by 4.79%, pursuant to the proposed buy-back of equity shares by the target company, Panacea Biotec Limited.

5.2 The exemption is granted subject to the following conditions:

a. The statements/averments made and facts/figures given in the application are true and correct to the best knowledge of the acquirers.

b. The acquirers i.e. promoter and promoter group of the target company shall ensure compliance with the statements, disclosures and undertakings made in the application.

c. The proposed buy-back shall be in accordance with the relevant provisions of the Companies Act, 1956, Securities and Exchange Board of India (Buy-back) Regulations, 1998, the Listing Agreement and other applicable laws.

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.

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

PLACE: MUMBAI DATE: JUNE 23, 2010