Sebi asks 5 cos to make open offer in over 15-yr old case

Re-affirming its order passed in the case 15 years ago, Sebi today asked five companies to make an open offer to shareholders of Saurashtra Cements in compliance with takeover regulations and also pay the interest amount.
The latest order pertains to five companies -- Fawn Trading, Willow Trading, Pallor Trading, Fern Trading and Tejashree Trading -- who had challenged Sebi's ruling passed on January 15, 1999.
Along with the consideration amount, Sebi today directed them to pay along with the consideration amount, an interest at the rate of 10 per cent from the date of incurring the liability to make the public announcement till to shareholders.

These shareholders would be those who were holding shares in Saurashtra Cements on the date of violation and whose shares have been accepted in the open offer.
The case relates to these companies acquiring shares of Saurashtra Cements and then not making an open offer triggered under Sebi's takeover regulations. The stake purchases happened in 1998.
"... It would definitely be in the interest of the shareholders of the target company and the securities market if the noticees (the five companies) are directed to make the public announcement of an open offer now, as was directed vide the Sebi order dated January 15, 1999" Sebi's Whole Time Member Prashant Saran said in his 28-page order today.

The concerned entities had appealed against the 1999 ruling.

"I am of the considered view that the implementation of the offer would definitely be in the interest of the public shareholders (both original shareholders and others), as there would be an exit opportunity to them," Saran said.
Noting that the noticees were the subsidiaries of a main promoter of Saurashtra Cements, Sebi said by virtue of the preferential allotment, the promoter group -- through the noticees -- had consolidated and acquired substantial shareholding in the target company.
"The noticees (being part of the promoter group) intending to take benefit of exemption from the requirement of a open offer should have ensured that all the conditions (the compliance of which would grant them the exemption) and requirements were complied with," the order said.

The five entities also contended that a long time has passed and the 1999 order has lost its significance.
However, Saran observed that since 'passage of time' is only because of the continuous litigation pursued by the noticees, there should be no advantage of 'passage of time' or 'changed circumstances' for them.
"The noticees cannot be termed as the victims of delay, rather they are the reason for the same," the latest order said.
"An order directing an acquirer to make an open offer in a case of default, is not a coercive order. It is an equitable remedy to the shareholders," it noted.