Nirma may execute open offer in Shree Rama

Shree Rama shares hit upper circuit on SC order

Detergent-maker Nirma Industries will have to complete an open offer for the shares of Ahmedabad- based packing firm Shree Rama Multi Tech, after the Supreme Court on Thursday dismissed its appeal against a Securities and Exchange Board of India (Sebi) directive in this regard. Shree Rama shares hit the upper circuit, gaining 19.83 per cent at Rs 5.74 in early trade on Thursday.

The takeover regulations formulated by Sebi require an acquirer who buys shares in a particular company above prescribed limits, to make an open offer to buy a certain amount of shares from the public. In 2008, Nirma had moved the Supreme Court challenging the Securities Appellate Tribunal’s (SAT) decision which upheld Sebi’s order rejecting the company’s request for withdrawal of the open offer for shares

Market watchers said the Shree Rama case dates back to 2002, when Nirma had bought convertible notes of the former. In 2005, Nirma came to own 24.25 per cent after the company defaulted. It also announced an open offer for a further 20 per cent at a price of Rs 18.60 a piece. But, it later wanted to revise the offer as the market price of the stock was much below the conversion price. Nirma, then wanted to withdraw the open offer obligations, after alleging that siphoning of funds by the erstwhile promoters came to light only after the public announcement for open offer was made. But Sebi did not buy this argument and directed Nirma to complete its open offer.

On June 5, 2008, SAT upheld the Sebi order, saying Nirma Industries and Nirma Chemical Works tried to wriggle out of a bad bargain, not permissible under Regulation 27(1)(d) of the takeover code.

Shree Rama has around 19,000 small shareholders, with holdings of less than Rs 1 lakh each, according to the latest exchange filings.
THE STORY SO FAR

2002
March: Three group companies of Shree Rama Multi Tech issue 4,894 convertible notes to Nirma Industries and Nirma Chemicals valued at Rs 66 crore
Companies pledge 14.28 million shares of Shree Rama as collateral

2005
June 10: Nirma sends notice seeking redemption of notes, failing which pledge will be invoked
June 22: Nirma invokes pledge and acquires Shree Rama shares amounting to 24.25 per cent
July 26: Merchant bankers LKP Shares make public announcement of open offer
August 8: Letter of offer was filed with Sebi

2006
April 26: Sebi issues observations (clears offer)
May 4: Nirma writes to Sebi seeking to withdraw offer, citing steep fall in share price
September 22: Merchant banker writes to Sebi, citing “special circumstances,” alleging fraud by erstwhile promoters

2007
April: Sebi directs Nirma to execute open offer

2008
June: SAT upholds Sebi order; NIrma moves SC

2013
May : Supreme Court dismisses Nirma petition

Source: Sebi, SAT orders