Order in the matter of Suprajit Engineering Ltd

WTM/GM/CFD/98 /2018–19 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTION 11(1) AND SECTION 11(2) (h) OF THE SEBI ACT READ WITH REGULATION 11(5) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 2011 IN THE MATTER OF PROPOSED ACQUISITION OF SHARES AND VOTING RIGHTS IN – TARGET COMPANY SUPRAJIT ENGINEERING LIMITED ACQUIRERS SUPRIYAJITH FAMILY TRUST

BACKGROUND – 1. Suprajit Engineering Limited (“Target Company”) was incorporated under the Companies Act, 1956 on May 24, 1985. The Registered Office of the Target Company is at No.100, Bommasandra Industrial Area, Bangalore – 560 099, Karnataka. The shares of the Target Company are listed on Bombay Stock Exchange Limited (“BSE”) and National Stock Exchange of India Limited (“NSE”).

2. An Application dated January 04, 2019 (“Application”) under Regulation 11(1) the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“Takeover Regulations”) was received by SEBI, seeking exemption from the applicability of inter alia Regulation 3 (1) of the Takeover Regulations in the matter of proposed acquisition of shares in the Target Company, was received by SEBI from Shri K. Ajith Kumar Rai – Trustee of Supriyajith Family Trust (“Acquirer Trust”).

3. Facts relevant to the Application and grounds for exemption stated therein are extracted below: – A. As per the Application, the proposed acquisition of shares by the Acquirer Trusts envisages the following – (i) Supriyajith Family Trust (“Acquirer Trust”/ “Acquirer”) is a Trust settled by Mr. K. Ajith Kumar Rai and Mrs. Supriya Ajith Rai, the promoters of the company. Mr. K. Ajith Kumar Rai, along with his wife, Mrs. Supriya Ajith Rai, collectively hold 100% of the shares of Acquirer Trust. (ii) The Acquirer Trust proposes to acquire 5,31,51,540 shares having a face value of Re. 1 each of the Target Company from Mr. K. Ajith Kumar Rai and Mrs. Order in the matter of Suprajit Engineering Limited

Supriya Ajith Rai, the promoters of the Target Company (also hereinafter collectively referred to as "transferor-promoters"), aggregating to a total of 38% of the equity share capital of the Target Company. The acquisition would trigger Regulation 3 (1) of the SAST Regulations, 2011 and the acquirer has requested an exemption from making an open offer under SAST. (iii) The proposed acquisition is a non-commercial transaction to be undertaken pursuant to a private family arrangement which is intended to facilitate the family succession plan of the promoters and to ensure seamless transition in the future. (iv) The proposed transfer is in no way prejudicial to the interests of the public shareholders and will not result in reduction in the holding of the public shareholders in the Target Company. It will ensure that there are no future conflicts in ownership pertaining to the promoter shareholding and such stability will in fact be in the interest of the Target Company and all its stakeholders and shareholders. (v) Pursuant to the proposed acquisition, no outsider will acquire shares, directly, or indirectly, in the Target Company as the acquisition takes place between the entities that are part of the promoter group. (vi) There is no new acquisition of shares by the promoters group and the pre-acquisition and post-acquisition shareholding of the Promoter Group in the Target Company would remain the same at 44.50%. (vii) The Promoters wanted to restrict the rights of next generation to alienate their shares, or otherwise take any individual action, to the prejudice of others in the promoter group and the public shareholders, and therefore have proposed that the shares be held in a Trust. This has been done to ensure that shareholding, unless it is sold jointly with others, or under permission from others, cannot be sold individually. Thus, it adds a measure of permanence to the promoter’s stakeholding in the company, and displays their commitment to the company.

B. The shareholding in the Target Company as on the date of the application along with the shareholding after the proposed acquisition in the Target Company, is depicted below:

TABLE A – SHAREHOLDING IN THE TARGET COMPANY (SOURCE: APPLICATION) PRE AND POST SHAREHOLDING OF PROMOTERS IN TC PRE-TRANSACTION POST-TRANSACTION S.N. NAME OF NO. OF % NO. OF % SHAREHOLDER SHARES SHAREHOLDING SHARES SHAREHOLDING PROMOTERS & PROMOTER GROUP OTHER THAN ACQUIRERS 1 AKHILESH RAI 12,00,000 0.86 12,00,000 0.86 2 ASHUTOSH RAI 12,00,000 0.86 12,00,000 0.86 3 AASHISH RAI 12,00,000 0.86 12,00,000 0.86 SUPRIYA AJITH 1,43,46,358 10.26 17,57,835 1.26 4 KUMAR RAI K. AJITH KUMAR 4,42,66,799 31.65 37,03,782 2.65 5 RAI

0 0.00 5,31,51,540 38 6 ACQUIRER PUBLIC 7,76,59,316 55.52 7,76,59,316 55.52 OTHERS TOTAL 5,24,67,740 100 5,24,67,740 100

C. The Settlor, Trustees and Beneficiaries of Acquirer Trusts, as per the Trust Deed are as under – TABLE B ACQUIRER TRUST 1 – SUPRIYAJITH FAMILY TRUST SETTLOR TRUSTEE BENEFICIARIES RELATIONSHIP 1. Mr. K. Ajith 1. Mr. K. Ajith 1. Mr. K. Ajith Kumar Rai and 1. Mr. Ajith Kumar Rai is Kumar Rai Kumar Rai Mrs. Supriya Ajith Rai the MD & Chairman, and and 2. Children of Mr. K. Ajith and also promoter 2. Mrs. 2. Mrs. Kumar Rai and Mrs. Supriya director of the Target Supriya Supriya Ajith Rai (unless declared to Company. Ajith Rai Ajith Rai be an excluded person) 2. Mrs. Supriya Ajith Rai 3. Lineal descendants of Mr. K. is director of the Target Ajith Kumar Rai and Mrs. Company. Supriya Ajith Rai, whether in existence now or who come into existence during the term of this Trust. 4. Spouses/ widow(er)s of lineal descendants of Mr. K. Ajith Kumar Rai and Mrs. Supriya Ajith Rai (unless declared to be an excluded person)

D. The Acquirer proposes to acquire 5,31,51,540 shares from Mr. K. Ajith Kumar Rai and Mrs. Supriya Ajith Rai, the promoters of the Target Company, aggregating to a total of 38% of the equity share capital of the Target Company. The promoter shareholding in the company, pre and post the proposed acquisition, is as follows: TABLE C

PRE – ACQUISITION POST – ACQUISITION ACQUIRER/TRANSFEROR NO. OF % OF NO. OF % OF SHARES SHARES SHARES SHARES Mr. K. Ajith Kumar Rai and Mrs. 5,86,13,157 41.91 54,61,617 3.91 Supriya Ajith Rai (Transferor) Supriyajith Family Trust 0.00 0.00 5,31,51,540 38 (‘Acquirer Trust ’)

4. In their reply to certain clarifications sought by SEBI through e-mails dated January 09, 2019, January 16, 2019, February 20, 2019 and February 22, 2019, the Acquirer Trust vide email dated January 16, 2019, January 17, 2019, February 20, 2019 and February 26, 2019 confirmed their compliance with the Guidelines outlined in the Schedule to the SEBI Circular dated December 22, 2017.

CONSIDERATION – 5. I have considered the Application submitted by the Acquirer and other material available on record and without reiterating the facts as stated above, the following is noted – A. The aforesaid proposed acquisitions will attract Regulation 3(1) of the Takeover Regulations. Regulation 3(1) of the Takeover Regulations states – “Substantial acquisition of shares or voting rights. 3. (1) No acquirer shall acquire shares or voting rights in a Target Company which taken together with shares or voting rights, if any, held by him and by persons acting in concert with him in such Target Company, entitle them to exercise twenty-five per cent or more of the voting rights in such Target Company unless the acquirer makes a public announcement of an open offer for acquiring shares of such Target Company in accordance with these regulations. B. Pursuant to the proposed acquisitions, the Acquirer Trusts would hold shares in the Target Company.

C. The objective of the proposed acquisitions is to provide for a suitable succession planning structure to enable seamless inter–generational transfer of the Trust fund among the beneficiaries who are family members. D. There will be no change in control of the Target Company pursuant to the proposed acquisition. E. The pre–acquisition and post–acquisition shareholding of the Promoters in the Target Company will remain the same (except that of the transferors and the transferees in this transaction). F. There will also be no change in the public shareholding of the Target Company. G. The Target Company is in compliance with the minimum public shareholding requirements under the Securities Contracts Regulation Rules, 1957 (“SCRR”). H. The proposed Acquirers have also confirmed that they are in compliance with the Guidelines outlined in the Schedule to the SEBI Circular dated December 22, 2017.

6. Considering the aforementioned, I am of the view that exemption as sought for in the Application (read with further submissions) may be granted to the proposed Acquirers, subject to certain conditions as ordered herein below.

ORDER – 7. In view of the above, I, in exercise of the powers conferred upon me under Section 19 read with Section 11(1) and Section 11(2)(h) of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”) and Regulation 11(5) of the Takeover Regulations, hereby grant exemption to the proposed Acquirer - Supriyajith Family Trust, from complying with the requirements of Regulation 3(1) of the Takeover Regulations with respect to the proposed acquisition/exercise of voting rights in respect of the Target Company, viz. Suprajit Engineering Limited, by way of proposed transactions as mentioned in the Application.

8. The exemption so granted is subject to the following conditions: A. The proposed acquisition shall be in accordance with the relevant provisions of the Companies Act, 2013 and other applicable laws. B. On completion of the proposed acquisition, the proposed Acquirers shall file a report with SEBI within a period of 21 days from the date of such acquisition, as provided in the Takeover Regulations.

C. The statements/ averments made or facts and figures mentioned in the Application and other submissions by the proposed Acquirers are true and correct. D. The proposed Acquirers shall ensure compliance with the statements, disclosures and undertakings made in the Application. The proposed Acquirers shall also ensure compliance with the Guidelines outlined in the Schedule to the SEBI Circular dated December 22, 2017. E. There shall be no delegation of powers of the Trustees to any person, other than the immediate relatives or lineal descendants of the transferor-promoters at any time, during the term of the Trust. F. The proposed Acquirers shall also ensure that the covenants in the Trust Deeds are not contrary to the above conditions and undertakings provided by them and the transferors. In such case, the Trust Deeds shall be suitably modified and expeditiously reported to SEBI. 9. The exemption granted above is limited to the requirements of making open offer under the Takeover Regulations and shall not be construed as exemption from the disclosure requirements under Chapter V of the aforesaid Regulations; compliance with the SEBI (Prohibition of Insider Trading) Regulations, 2015, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 or any other applicable Acts, Rules and Regulations. 10. The Application filed on January 04, 2019, by Sh. K. Ajith Kumar Rai – Trustee of Supriyajith Family Trust, is accordingly disposed of.

Place: New Delhi G. MAHALINGAM Date: March 07, 2019 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA