Sebi asks Hitachi to make offer

The Securities and Exchange Board of India (Sebi) has directed the Hitachi group (Hitachi Home & Life Solutions Inc and Hitachi India Pvt Ltd) to make an open offer to the shareholders of Hitachi Home and Life Solutions (India) Ltd with December 24, 2002, as the reference date.

According to the Sebi order, the acquirers will also have to pay interest at the rate of 10 per cent per annum on the offer price from May 1, 2003, till the actual date of payment of consideration by the acquirers to the shareholders of the target company.

The Lalbhai group held 54.4 per cent stake in the target company "" Hitachi Home & Life Solutions (India) Ltd. By a management agreement on January 22, 1999, the Lalbhai Group and Hitachi India Pvt Ltd and Hitachi Ltd agreed to come together to form a joint venture to enable the Lalbhai Group and the target company to strengthen their relationship with the Hitachi Group.

A preferential allotment was also made, as a result of which the Lalbhai Group held 35.2 per cent and Hitachi India Pvt Ltd & Hitachi Ltd together held 35.2 per cent in the target company.

Subsequently, Hitachi Ltd transferred its entire shareholding in the target company to its 100 per cent owned subsidiary, Hitachi Home and Life Solutions Inc on April 1, 2002.

So the collective shareholding of Hitachi Home and Life Solutions Inc. and Hitachi India Pvt Ltd became 35.2 per cent in the target company.

Incidentally, the Lalbhai group has also pledged 26.31 per cent of its stake in the target company with ICICI Bank and having defaulted on repayment of its loans, these shares reverted to the bank and Lalbhai Group's stake stood reduced to 9.42 per cent.

Later on, the Lalbhai group expressed its intention of buying back these shares from the bank following which its shareholding would have gone up to 35.73 per cent.

The group had sought exemption from open offer, which was declined. Later on the group restricted its acquisition from ICICI Bank to 9.94 per cent.

Meanwhile the entire shareholding of 19.37 per cent (inclusive of the 9.94 per cent shares bought from ICICI Bank Ltd.) held by the Lalbhai Group was acquired by Hitachi Group on January 18, 2003.

Passing the order Sebi said that the intention of Lalbhai Group behind restricting its acquisition at 9.94 per cent equity in the target company from ICICI Bank Ltd (as against the 26.31 per cent proposed earlier) was clearly to keep it within the permitted creeping acquisition limit of 10 per cent and to claim coverage of the acquisition under Regulation 11(1) on the ground that both Lalbhai and Hitachi groups were "persons acting in concert".