Order on panel application submitted by M/s Quadrant Enterprises Private Limited

1.1 HFCL Infotel Limited (hereinafter referred to as the target company) is a company incorporated under the Companies Act, 1956, having its registered office at B-71, Industrial Focal Point, Phase – VII, Mohali, Punjab-160055. The equity shares of the target company are listed on the Bombay Stock Exchange Limited (hereinafter referred to as BSE) and Madras Stock Exchange Limited (hereinafter referred to as MSE).

2.0 APPLICATION FOR EXEMPTION

2.1 Quadrant Enterprises Private Limited (hereinafter referred to as the acquirer), vide letter dated September 14, 2009 filed an application under Regulation 4 of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997 (hereinafter referred to as the Takeover Regulations) in respect of the proposed acquisition of 32,67,05,000 equity shares of Rs.10/- each of the target company representing 53.3605% of its equity shares, pursuant to the proposal for settlement/change of management approved under the Corporate Debt Restructuring (CDR) System by the CDR Cell. As per the application, the proposed acquisition of equity shares is at zero value as per the scheme approved by the CDR Cell, vide letter

CDR(JCP) No.563/2009-10 dated August 13, 2009. It was also stated that, in consideration of Videocon Group having agreed to settle the entire term loan (about Rs.644 crores) in a phased manner as specified in the CDR package, the CDR Cell approved the change in management at zero value. It is stated in the said application that the acquirer is promoted by the Videocon Group and that the promoters of Videocon Group have extended their personal guarantee (as per the settlement terms). It was also mentioned that the Videocon Group has undertaken to infuse funds into the target company through the acquirer, from time to time to meet the financial obligation, in terms of the aforesaid approval under the CDR System. It was further mentioned in the application that, as per the terms and conditions of the CDR scheme, the existing promoters of the target company would transfer their entire shareholding in the target company to Videocon Group at zero/nominal value. Accordingly, the acquirer, a group company of Videocon Group, proposes to acquire the shares of the target company as stated above in this order. It is submitted that the acquirer currently does not hold any shares in the target company and pursuant to the proposed acquisition the shareholding of the acquirer would increase to 53.3605% of the total equity capital of the target company. As per the application, there would also be a consequent change of management and control of the target company. Since the aforesaid acts would trigger Regulations 10 and 12 of Takeover Regulations, the application is filed seeking exemption from the applicability of the aforesaid Regulations, inter alia, on the following grounds:

i. The acquisition of shares/management control is pursuant to settlement/change of management envisaged under the CDR mechanism approved by CDR Cell vide letter dated August 13, 2009. ii. The implementation of CDR package may revive the target company, which in turn would be beneficial to the interest of the target company at large and the stakeholders, in particular. iii. An approximate amount of Rs.644 crores is outstanding to be paid to the banks/institutions. Unless remedial measure is immediately taken the same would also have an effect on the lenders and their stakeholders. iv. In the present circumstances, the target company has no future and may go into liquidation unless huge funds, as envisaged under the CDR package, are infused into the target company to revive its operations. v. Post acquisition, the target company would have management with experienced professionals from the Videocon group, one of the largest conglomerates in India. 2.2 The shareholding pattern of the target company before and after the proposed acquisition (as mentioned in the aforesaid application) is as under:

Number of registered Shareholders’ Before the proposed shareholders as After the proposed acquisition category acquisition on the date of application % of Number of % of shares/ Number of shares/ shares/ total total voting shares/ voting total voting voting rights held capital rights capital Promoter Group 1 32,67,05,000 53.36% - - Acquirer - - - 32,67,05,000 53.36% FIs/ Bank 10 16,98,15,347 27.735% 16,98,15,347 27.735% FIIs/NRIs/OCBs 69 2,81,703 0.0460% 2,81,703 0.0460% Public 13,459 11,54,58,218 18.857% 11,54,58,218 18.857% Total 13,539 61,22,60,268 100.00% 61,22,60,268 100%

3.0 RECOMMENDATION OF THE TAKEOVER PANEL

3.1 The application filed by the target company was forwarded by SEBI to the Takeover Panel in terms of Regulation 4 (4) of the Takeover Regulations. The Takeover Panel, vide report dated February 8, 2010, inter alia, observed the following:

“..It was observed by the panel that the Target Company has been facing financial problems for quite some time and currently it has outstanding debts to the tune of Rs. 644 crores payable to the Banks and Financial Institutions. The CDR Scheme has been prepared with a view to restructure the Target Company’s liabilities and revive it by induction of additional funds and managerial expertise from the Videocon Group. It was also informed by the Department that the CDR package has been disclosed as part of the notes to the latest quarterly results (December 2009 quarter) of the Target Company. Further, the shares of the Target Company are infrequently traded on both the exchanges i.e Bombay Stock Exchange and Madras Stock

Exchange as per the explanation (i) to Regulation 20(5) of the SEBI (SAST) Regulations. Taking all the relevant factors into consideration, the panel found the proposal in the interest of all the stakeholders including the public shareholders and recommended the grant of exemption to the Acquirer from the applicability of the provisions of Regulations 10 and 12 of the SEBI (SAST) Regulations….”

4.0 FINDINGS

4.1 I have considered the application filed by the acquirer, the recommendation of the Takeover Panel and other material available on record. I note that the proposed acquisition is pursuant to the CDR package in terms of CDR Cell letter dated August 13, 2009. In terms of the said letter, the CDR Cell had approved the induction of strategic investor/new promoter with change of management from existing promoters to Videocon Group subject to the necessary approvals. Pursuant to the said letter, the Videocon Group of Companies, vide letter dated September 14, 2009 informed the CDR Cell that the acquirer would be the strategic investor of the target company. I note that the proposed acquisition is part of the CDR package approved by the CDR Cell in order to revive the target company and settle the loans of around Rs.644 crores payable by the target company. Pursuant to the proposed acquisition, the shareholding/voting rights of the acquirers in the target company would increase from 0% to 53.3605% and that there would be a change in management and control of the target company from the existing promoters to the acquirer. It is submitted in the application that the target company has no future under the present circumstances and may go into liquidation unless huge funds from the Videocon Group, as envisaged under the CDR package, are infused into it to revive its operations. As per the application, there would not be any change in the public shareholding of the target company. It was also mentioned that pursuant to the proposed acquisition, the target company would have management with professional from the Videocon Group.

4.2 Taking into account all the facts and circumstances as mentioned above, I agree with the recommendations of the Takeover Panel and of the view that this is a fit case for grant of exemption, from the applicability of Regulations 10 and 12 of the Takeover Regulations with respect to the proposed acquisition of 32,67,05,000 equity shares of the target company and the consequential change in management and control over the target company, as stipulated by the CDR Cell.

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 Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, hereby grant exemption to the acquirer, Quadrant Enterprises Private Limited, from the applicability of Regulations 10 and 12 of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997, in respect of the proposed acquisition of 32,67,05,000 equity shares of the target company, HFCL Infotel Limited and the consequential change in management and control over HFCL Infotel Limited.

5.2 The exemption is granted on the basis of the facts and averments made in the application and subsequent letters filed on behalf of the acquirer and subject to the following conditions:

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

ii. The acquirer shall ensure compliance with the statements, disclosures and other undertakings, made in the application and other correspondence.

5.3 This exemption shall not be construed as exemption from the 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: MARCH 3, 2010