Sebi asks Sarla Performance promoters to certain sell shares

Finding them in violation of takeover norms, Sebi today directed eight promoter entities of Sarla Performance Fibres to sell 27,633 shares of the company as part of protecting investor interests.
The capital market regulator's direction would be applicable on Hindustan Cotton, Satidham Industries, Madhusudan Jhunjhunwala, Krishnakumar Jhunjhunwala, Vrinda K Jhunjhunwala, Sarladevi M Jhunjhunwala, Krishnakumar & Sons - HUF and Madhusudan Jhunjhunwala HUF.
Sebi has asked these entities to sell jointly or severally 27,633 shares (0.40 per cent) of Sarla Performance Fibres to parties that are not connected to them.
The sale should be done in small lots in trenches on the BSE and NSE ensuring that such sale does not disturb the market equilibrium.

Besides, Sebi in its order said proceeds from the sale, to be completed in three months, should be transferred to the Investor Protection and Education Fund.
The case relates to violation of takeover norms. These entities held 43,73,167 shares or 62.92 per cent of shares capital of Sarla Performance as on August 6, 2009.

Further, from August 6, 2009 till September 23, 2011, two of the promoter entities -- Madhusudan Jhunjhunwala- HUF, and Satidham Industries -- acquired additional 27,633 shares.
Acquisition of 27,633 shares without making public announcement violated takeover norms, especially since the regulator had cleared the ambiguity regarding applicability of these rules on August 6, 2009, according to Sebi.

As per August 6, 2009 clarification, an acquirer may purchase additional shares or voting rights up to a maximum of 5 per cent voting rights in a target company in one or more tranches, without any restriction on the time-frame.
"Thus, the public announcement, if made now would be a mere formality. Considering this fact and other mitigating factors.
"... I am of the view that a direction to sell 27,633 shares of the target company in small lots on the concerned stock exchange and transfer of the entire proceeds of such sale of shares to the Investor Protection and Education Fund would be commensurate with the violation as found in this case," Sebi Whole Time Member Rajeev Kumar Agarwal said in his order.

Noting that since the Fund is utilised for the purpose of protection of investors and promotion of investor education and awareness, Agarwal said he was of the "considered view that in the facts and circumstances of this case the above directions would be in the interest of investors".