Order in the matter of Tata Communications Limited

WTM/SKM/CFD/5/2020-21 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTION 11(1) AND SECTION 11(2)(h) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA ACT, 1992 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 TATA COMMUNICATIONS LIMITED ACQUIRER PANTONE FINVEST LIMITED

Background 1. Tata Communications Limited (for convenience “Target Company”) was incorporated as a limited liability company on March 19, 1986 and was, at that time, called ‘Videsh Sanchar Nigam Limited’ and was wholly owned by the Government of India (for convenience “GoI”). On April 1, 1986, the Target Company assumed control and management of international telecommunication services from the Overseas Communication Service (OCS), a department of the Ministry of Communications of the GoI. In 2002, the Target Company was privatized with the persons acting in concert, acquiring a controlling stake in the Target Company. 2. The Target Company’s registered office is located at VSB, Mahatma Gandhi Road, Fort, Mumbai – 400001. Currently, the main business activities of the Target Company are national and international telecommunications services including internet services, information technology products and services and leasing, developing etc. of immovable properties of the Target Company. Order in the matter of Tata Communications Limited

3. An Application dated February 05, 2021 (for convenience “Application”) seeking exemption from the applicability of regulation 3(2) read with regulation 10(1)(a)(ii) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (for convenience “Takeover Regulations 2011”) in the matter of proposed direct acquisition of shares in the Target Company has been received by SEBI from Pantone Finvest Limited (for convenience “Acquirer”). 4. Regulation 3(2) and Regulation 10(1)(a)(ii) of the Takeover Regulations 2011 states as under- “Substantial acquisition of shares or voting rights. 3. (2) No acquirer, who together with persons acting in concert with him, has acquired and holds in accordance with these regulations shares or voting rights in a target company entitling them to exercise twenty-five per cent or more of the voting rights in the target company but less than the maximum permissible non-public shareholding, shall acquire within any financial year additional shares or voting rights in such target company entitling them to exercise more than five per cent of the voting rights, unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with these regulations: Provided that such acquirer shall not be entitled to acquire or enter into any agreement to acquire shares or voting rights exceeding such number of shares as would take the aggregate shareholding pursuant to the acquisition above the maximum permissible non-public shareholding.

General Exemptions 10(1) The following acquisitions shall be exempt from the obligation to make an open offer under regulation 3 and regulation 4 subject to fulfillment of the conditions stipulated therefor,— (a) acquisition pursuant to inter se transfer of shares amongst qualifying persons, being- (i)… (ii) persons named as promoters in the shareholding pattern filed by the target company in terms of the [listing regulations or as the case may be, the listing agreement] or these regulations for not less than three years prior to the proposed acquisition; Provided that for purposes of availing of the exemption under this clause,— (i) If the shares of the target company are frequently traded, the acquisition price per share shall not be higher by more than twenty-five per cent of the volume-weighted average market price for a period of sixty trading days preceding the date of issuance of notice for the proposed inter se transfer under sub-regulation (5), as traded on the stock exchange where the maximum volume of trading in the shares of the target company are recorded during such period, and if the shares of the target company are infrequently traded, the acquisition price shall not be higher by more than twenty-five percent of the price determined in terms of clause (e) of sub-regulation (2) of regulation 8; 5. In the aforementioned Application, the following has been, inter alia, stated: (a) The issued, subscribed and paid up Equity Share Capital of the Target Company is ₹2,85,00,00,000/- divided into 28,50,00,000 equity shares of ₹10/- each.

Target Company has a public shareholding of 25.01% and the non-public shareholding of 74.99% is entirely held by the promoters and the promoter group. GoI is also a promoter in the Target Company and presently holding 7,44,46,885 equity shares through President of India, constituting 26.12% of the total shareholding of the Target Company. (b) Based on recommendations of the Department of Investment and Public Asset Management in terms of the letter dated January 12, 2021, the GoI proposes to divest its equity shareholding of 26.12% in the Target Company. As an initial step, the GoI intends to sell up to 4,59,46,885 equity shares forming 16.12% equity shareholding of the Target Company through Offer for Sale through stock exchange mechanism route (for convenience “OFS”) in terms of the circulars / guidelines issued by SEBI from time to time.

(c) Immediately following the completion of the OFS process, the GoI intends to sell to the Strategic Partner i.e. Acquirer, a portion of or the entire balance shareholding held by GoI in the Target Company, as is mutually agreed, and the Strategic Partner will acquire the same (for convenience “Share Sale”). (d) The GoI intends to undertake the Share Sale at a price which is discovered under the OFS process subject to the OFS Circulars / guidelines (for convenience “OFS Price”). Therefore, the Acquirer will not be aware of the price per equity share of the Target Company for the Share Sale until the conclusion of the OFS process and such price may not be within the limit provided in proviso (i) to regulation 10(1)(a) of the Takeover Regulations 2011. (e) Apart from the Share Sale constituting 10.00% of the share capital, the Acquirer would also purchase the unsubscribed portion of equity shares of the Target Company in the OFS process. Hence, there would be a situation where the acquisition would exceed the threshold provided under regulation 3(2) of the Takeover Regulations 2011, thereby triggering an obligation for making an open offer under the Takeover Regulations 2011. (f) However, since the Acquirer and the GoI are both persons named as promoters of the Target Company in the shareholding pattern filed by the Target Company for more than three years prior to the date hereof, hence, the Acquirer would be exempt from making an open offer under regulation 10(1)(a)(ii) of the Takeover Regulations 2011, subject to fulfilment of the conditions prescribed in the proviso to regulation 10(1)(a) of the Takeover Regulations 2011. The condition prescribed in proviso (i) to regulation 10(1)(a) of the Takeover Regulations 2011 (for convenience “Pricing Condition”) requires that if the shares of the Target Company are frequently traded, the acquisition price per share shall not be higher by more than twenty-five percent of the volume-weighted average market price for a period of sixty trading days preceding the date of issuance of notice under regulation 10(5) of the Takeover Regulations 2011, as traded on the stock exchange where the maximum volume of trading in the shares of the target company are recorded during such period.

(g) In the present case, since the Share Sale is intended to be undertaken at the OFS Price which will be determined as part of the OFS process, the Acquirer and the GoI cannot determine the price at which the Share Sale will occur so as to meet the above requirement of proviso (i) to regulation 10(1)(a) of the Takeover Regulations 2011 for inter-se share transfers between the promoters of the Target Company. (h) Accordingly, the exemption application has been made by the Acquirer along with its PACs under regulation 11 (1) of the Takeover Regulations 2011 from the requirement to meet the Pricing Condition with respect to Share Sale, which would otherwise be exempt from making an open offer under Regulation 10(1)(a)(ii) of the Takeover Regulations 2011 read with regulation 3(2) of the Takeover Regulations 2011. (i) Pursuant to the proposed direct acquisition of shares by the Acquirer from the GoI, there will be no change in either the total equity share capital or the total share capital of the Target Company. Grounds for seeking exemption 6. The Acquirer has sought exemption vide its Application on the following grounds: (a) In terms of the Shareholders’ Agreement dated February 13, 2002 (for convenience “SHA”), the GoI intended to exit the Target Company as early as 2007. However, since there was certain surplus land in the Target Company, which was to be transferred to a new entity, GoI continued to hold its shareholding in the Target Company.

The surplus land of the Target Company has now been demerged to a new entity as per the terms of the SHA and the GoI has decided to completely exit from the Target Company.

(b) The GoI intends to divest of its shareholding in the Target Company partly through the OFS process, which is a route now available for divestment by promoters of a company. In terms of the SHA, the Acquirer has a right of first refusal on any sale of shares by the GoI. Accordingly, the Share Sale is being made as a part of such divestment and is intended to be undertaken at the price discovered through the OFS process. (c) If the OFS Price does not meet the Pricing Condition, the Share Sale will not qualify for the exemption for inter-se transfer of shares between promoters of a Target Company under regulation 10(1)(a)(ii) of the Takeover Regulations 2011. (d) Further, pursuant to the proposed transaction, there will be no change in the total equity share capital of the Target Company. Consideration 7. I have considered the Application submitted by the Acquirer and other material available on record. Without reiterating the facts as stated above, the following is noted: (a) The proposed acquisition is based on recommendations of the Department of Investment and Public Asset Management in terms of the letter dated January 12, 2021, by which the GoI proposes to divest its equity shareholding of 26.12% in the Target Company.

(b) The GoI intends to divest of its shareholding in the Target Company partly through the OFS process, which is a route now available for divestment by promoters of a company and partly through sale to a strategic partner (Acquirer.) The Share Sale to the strategic partner (Acquirer) is intended to be undertaken at the OFS Price which will be determined as the part of the OFS process. (c) Such increase in shareholding of the Acquirer and PAC from the current holdings of 48.87% to 58.87% in the Target Company would trigger an open offer obligation under regulation 3(2) of Takeover Regulations 2011. However, it is noted that both the Acquirer and GoI are part of the promoter group of the Target Company for more than three years in the past thereby, the proposed transaction is eligible for general exemption under regulation 10(1)(a)(ii) of Takeover Regulations 2011. However, it is noted that the proviso of the regulation 10(1)(a) of Takeover Regulations 2011 states that the price should be within the prescribed threshold. (d) The Acquirer and the GoI currently cannot determine whether the price arrived at in the OFS process will be in accordance with the proviso of regulation 10(1)(a) of Takeover Regulations 2011. In the view of the above, if the price discovered in the OFS falls under the prescribed range, the transaction will be eligible for automatic exemption.

However, in the event that the discovered price is not within the prescribed range, the transaction will not be eligible for automatic exemption. In the view of the same, exemption application under regulation 11 of Takeover Regulations 2011 has been filed. (e) In this respect, it is further noted that there is no change in either the capital the total equity share capital or the total share capital of the Target Company. Shareholding before Shareholding after the proposed Proposed the proposed Particulars transaction Transaction transaction Number of % Number % Number of % Shares Holding of Shares Holding Shares Holding Promoters and Promoter Group other than Acquirer President -of India 74446885 26.12 74446885 -26.12 0 0 The Tata Power Company Limited 0 0 0 0 0 0

Acquirer and PACs Pantone Finvest Limited 99172854 34.8 28500000 10 127672854 44.8 Tata Sons Private Limited 40087639 14.07 0 0 40087639 14.07 Public Public 71292622 25.01 45946885 16.12 117239507 41.14 Total 285000000 100 0 0 285000000 100 Order 8. 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 SEBI Act, 1992 and regulation 11(5) of the Takeover Regulations 2011, hereby grant exemption to the Proposed Acquirer, Pantone Finvest Limited, from complying with the requirements of regulation 3(2) read with regulation 10(1)(a)(ii) of the Takeover Regulations 2011 with respect to the proposed direct acquisitions in the Target Company, viz. Tata Communications Limited, by way of proposed transactions as mentioned in the Application. 9. The exemption so granted is subject to the following conditions: (a) The proposed acquisitions shall be in accordance with the relevant provisions of the Companies Act, 2013 and other applicable laws. (b) On completion of the proposed acquisitions, the Proposed Acquirer shall file a report with SEBI within a period of 21 days from the date of such acquisition, as provided in the Takeover Regulations 2011. (c) The statements / averments made or facts and figures mentioned in the Application and other submissions by the Proposed Acquirer are true and correct.

10. The exemption granted above is limited to the requirements of making an open offer and Pricing Condition under the Takeover Regulations 2011 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, Listing Agreement / SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 or any other applicable Acts, Rules and Regulations. 11. The Application dated January February 05, 2021 read with other submissions, filed by Acquirer, are accordingly disposed of. -Sd- Place: Mumbai S.K. Mohanty Date: February 23, 2021 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA