Order in the matter of proposed acquisition of shares of Trent Limited

WTM/PS/14/CFD-DCR/OCT/2012 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER IN THE MATTER OF PROPOSED ACQUISITION OF SHARES OF TRENT LIMITED – APPLICATION FILED UNDER REGULATION 11(1) READ WITH REGULATION 11(3) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 2011. 1. Trent Limited (hereinafter referred to as 'the Target Company') is a company incorporated under the Indian Companies Act, 1913 having its registered office at Bombay House, 24, Homi Mody Street, Mumbai- 400001. The equity shares of the Target Company are listed on the Bombay Stock Exchange Limited (hereinafter referred to as ‘BSE’) and the National Stock Exchange of India Limited (hereinafter referred to as ‘NSE’).

2. Tata Sons Limited (hereinafter referred to as ‘the Acquirer’), a promoter group company of the Target Company has filed an application dated July 23, 2012 with the Securities and Exchange Board of India (hereinafter referred to as 'SEBI'), under Regulations 11(1) and 11(3) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (hereinafter referred to as 'the Takeover Regulations'), seeking exemption from the applicability of the provisions of the Regulations 3(1) read with Regulation 3(3) of the Takeover Regulations, in respect of its proposed acquisition of 14,44,600 shares in the Target Company by way of preferential allotment. This proposed acquisition will increase the shareholding of the acquirer from 23.08% to 26.86%. It is stated in the application that:

a) The Acquirer is the promoter of the Target Company for several decades, b) Tata Investment Corporation Limited, Af-Taab Investment Company Limited and Titan Industries Limited (hereinafter collectively referred to as the 'Promoter group') are the other members of the promoter group of the Target Company. The Target Company is currently under the control of the Acquirer together with the Promoter group and there is only one cohesive set of controlling shareholders as Tata Investments Corporation Limited is a subsidiary of the Acquirer, Af-Taab Investment Company Limited is a wholly-owned subsidiary of the Tata Power Corporation Limited, a listed company of which the Acquirer is the promoter and Titan Industries Limited a listed company of which the Acquirer is the promoter. It has been submitted by the Acquirer that all these entities are acting in concert under Regulation 2(1)(q)(1) of the Takeover Regulations. c) The Target Company had made a rights issue of Cumulative Compulsorily Convertible Preference Shares (hereinafter referred to as 'CCPS') comprising of two series i.e. CCPS Series A (converted into an equivalent number of equity shares of the Target Company on September 1, 2011) and CCPS Series B (to be converted into an equivalent number of equity shares on September 1, 2012) in August 2010. In the said rights issue, the Acquirer was allotted 12,28,374 CCPS Series A and 12,28,374 CCPS Series B. d) On March 16, 2012, the Target Company allotted 27,41,228 equity shares of the face value of ₹10 each, at a price ₹912 per equity shares, to certain qualified institutional buyers under the Qualified Institutional Placement (hereinafter referred to as 'QIP') category in accordance with the provisions of Chapter VII of the SEBI (Issue of Capital an Disclosure Requirements) Regulations, 2009 (hereinafter referred to as 'ICDR Regulations'), thereby increasing the total equity share capital of the Target Company from 2,45,08,291 equity shares of the face value of ₹10 each to 2,72,49,519 equity shares of the face value of ₹10 each.

As a consequence of this, the voting rights of the Acquirer and the Promoter group have been diluted. e) It has now been proposed to issue 16,67,000 equity shares of the Target Company on preferential basis in accordance with Chapter VII of the ICDR Regulations, (hereinafter referred to as 'the Proposed Issue') at ₹980 per equity share. Out of these, 14,44,600 equity shares would be issued to the Acquirer along with its subsidiaries viz. Ewart Investments Limited and Panatone Finvest Limited and the remaining 2,22,400 shares would be allotted to Tata Investments Corporations Limited. After the proposed issue, the shareholding of the Acquirer, individually, would increase from 23.08% to 26.86% and shareholding of the Promoter group, collectively, would increase from 28.60% to 32.89%.

3. As the proposed acquisition would trigger the obligation for the Acquirer to make an open offer under Regulation 3(1) read with Regulation 3(3) of the Takeover Regulations, the application has been made seeking exemption from the applicability of Regulation 3(1) of the Takeover Regulations on the following grounds:

a) The shareholding of the Acquirer, together with the Promoter group is already in excess of 25%. Accordingly, the acquisition of additional 4.29% equity shares of the Target Company by the Acquirer and the promoter group pursuant to the Proposed issue will not breach the ‘creeping acquisition’ limit of 5% under Regulation 3(2) of the Takeover Regulation.

b) Until prior to the QIP in March 2012, the Acquirer's shareholding was in excess of the relevant 25% threshold and the provisions of Regulation 3(3) would not have been applicable to the Acquirer for the Proposed issue had it not been for the dilution of such holding due to the QIP. The dilution of the Acquirer's shareholding to that below the 25% threshold is as a result of a further issuance of shares by the Target Company and not a sale by the Acquirer. c) There will be no change in the control or management of the Target Company pursuant to the Proposed Issue. The Acquirer, together with the Promoter Group, is presently in control of the Target Company. d) Pursuant to the Proposed Issue, the public shareholding in the Target Company would still be in compliance with the minimum public shareholding requirements specified in Clause 40 A of the Listing Agreement. e) The acquisition of shares by the Acquirer shall not affect or prejudice, or be detrimental to, the interests of the public shareholders of the Target Company in any manner.

4. The acquirer made the exemption application in the standard format as advised by SEBI vide its letter dated August 10, 2012. The application of the Acquirer was referred to a Panel of Experts (hereinafter referred to as 'the Panel') to make recommendation thereon, in terms of the proviso to Regulation 11(5) of the Takeover Regulation. After examination of the facts and circumstances stated in the application, the Panel, vide its report dated August 31, 2012 recommended as under- “It was observed by the panel that prior to the QIP in March 2012, the Acquirer’s shareholding was in excess of the threshold limit of 25% and the same was diluted due to the QIP. There was no sale of shares by the Acquirer. Dilution took place in the Acquirer’s shareholding as a result of a further issuance of shares by the Target Company. It was further observed that the proposed preferential allotment will not result in any change in control of the management of the Target Company and the Target Company will continue to be in compliance with the minimum public shareholding requirements. The Panel members discussed the matter at length and came to the conclusion that the proposed preferential allotment will not in any manner adversely affect the interest of the public shareholders.

The Panel did not find any convincing reason for insisting on the Acquirer to make an open offer when the Acquirer along with PACs is not required to make such an open offer on account of creeping acquisition question. The Acquirer was in fact already having more than 25% shareholding prior to QIP and the dilution in its shareholding occurred due to further issuance of capital by the Target Company and not due to sale of shares by the Acquirer. Hence, the breach of the threshold limit of 25% again on account of creeping acquisition by the Acquirer does not appear to be of much consequence in the facts and circumstance of the case. Against the aforesaid background, the Panel Members viewed the requirement of making open offer by Acquirer as merely a technical requirement and therefore preferred to recommend and exemption as requested by Acquirer.” 5. I have considered the application of the Acquirer, the report of the Panel and the material available on record. It has been submitted before SEBI that the shareholding of the Acquirer just before the QIP as on March 15, 2012 was 25.66%. On the said date, the shareholding of the Promoter group, collectively, was 31.80%.

After the QIP, as on March 16, 2012, the shareholding of the Acquirer and the Promoter group reduced to 23.08% and 28.60% respectively. As a consequence of this, the voting rights of the Acquirer and the Promoter group have been diluted. The said QIP has resulted in the dilution of the shareholding of the Acquirer. I note that pursuant to the proposed acquisition of 16,67,000 equity shares by way of preferential allotment, the shareholding of the Acquirer together with persons acting in concert shall increase from 28.60% to 32.89% in the Target Company and the individual shareholding of the Acquirer would increase from 23.08% to 26.86% in the Target Company. This increase (from 23.08% to 26.86%) of the individual holding by the Acquirer in the Target Company would trigger the obligation to make an open offer in terms of the provisions of Regulations 3(1) and 3(3) of the Takeover Regulations. Therefore, exemption has been sought by the Acquirer from complying with the open offer requirements stipulated under Takeover Regulations.

6. The shareholding of the Acquirer along with the Promoter group of the Target Company as on March 15, 2012 and March 16, 2012 i.e., just before and after the QIP and after the proposed preferential allotment of shares, as mentioned in the application is discussed below: Promoter/promoter March 15, 2012 (Pre March 16, 2012 (Post Post conversion of Post preferential allotment group QIP allotment ) QIP allotment) CCPS (Series B) and conversion of CCPS (Series B) Shareholding in % Shareholding in % Shareholding in % Shareholding in % Tata Sons Ltd. 62,89,343 25.66% 62,89,343 23.08% 75,17,717 23.71% 89,62,317 26.86% Tata Investments 11,04,665 4.51% 11,04,665 4.05% 13,16,673 4.15% 15,39,073 4.61% Corporations Ltd. Af-taab Investments 3,99,990 1.63% 3,99,990 1.47% 4,72,714 1.49% 4,72,714 1.42% Ltd. (PAC) Titan Industries Ltd. 300 0% 300 0% 300 0% 300 0% (PAC) Total shareholding of 77,94,298 31.80% 77,94,298 28.60% 93,07,404 29.36% 1, 09,74,404 32.89% promoter and promoter group

Total Paid Up capital 2,45,08,291# 100% 2,72,49,519* 100% 31,700,933 100% 3,33,67,933 100% of Target Company * Increase in the total equity share capital of the Target Company was due to issuance of shares to Qualified Institution Buyers in QIP. # Includes the increase in total capital share capital due to conversion of CCPS Series A. 7. I note that the Acquirer is in the control of the Target Company and the proposed acquisition would not result in any change in control of the management of the Target Company. It is seen that the Acquirer was having more than 25% shareholding prior to the said QIP and the dilution in its shareholding occurred due to further issuance of capital by the Target Company and not due to sale of the shares by the Acquirer. I note that pursuant to the proposed preferential allotment of shares, the Target Company will continue to be in compliance with the minimum public shareholding requirements. I also note that the proposed acquisition would not affect or prejudice the interests of the public shareholders of the Target Company in any manner. 8. In view of the above, I agree with the observations and recommendations of the Panel and consider it to be a fit case for granting exemption from the requirements of regulation 3(1) and 3(3) of the Takeover Regulations.

9. 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 11(5) of the Takeover Regulations, hereby grant exemption to the Acquirer, Tata Sons Limited from complying with the requirements of Regulation 3(1) thereof in respect of its proposed acquisition of 14,44,600 equity shares of the Target Company, Trent Limited. 10. The exemption is granted subject to the following conditions: a. The proposed acquisition shall be in accordance with the relevant provisions of the Companies Act, 1956 and other applicable laws and shall be completed within 30 days from the date of this order and the acquirer shall file a report with SEBI in the manner provided in Takeover Regulations within 21 days from the date of the acquisition. b. The statements/ averments made or facts/ figures given in the application are true and correct to the best knowledge of Target Company. c. The acquirer/ Target Company shall ensure compliance with the statements, disclosures and undertakings made in the application and subsequent correspondences in this matter. d. This exemption is limited to the requirements of making open offer under regulation 3(1) read with regulation 3(3) of the Takeover Regulations and shall not be construed as exemption from the requirements of disclosure required under Chapter V of the Takeover Regulations, compliance of SEBI (Prohibition of Insider Trading) Regulations, 1993, the Listing Agreement or any other applicable Acts, Rules and Regulations.

11. The exemption so granted above shall not be construed as an exemption from the requirements of any other provisions of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulation, 2011 (e.g. disclosure requirements under Chapter II), the Listing Agreement or any other law.

PLACE: MUMBAI PRASHANT SARAN DATE: 25/10/2012 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA