Sebi on Tuesday rejected request of a family trust to exempt it from making open offers for two companies of diversified Max Group, following rejig of promoter holdings.
Neeman Family Foundation Trust — a trust of Max Group promoter Analjit Singh — had sought exemption from open offer requirement with respect to share acquisition in Max Financial Services, erstwhile Max India, and Max Ventures and Industries.
Following a proposed rejig of shareholdings in the group entities, the trust will have over 25 per cent stake each in Max Financial Services, and Max Ventures and Industries. This will trigger the requirement of open offer under Sebi norms.
In two separate but similarly-worded orders, Sebi Whole Time Member G Mahalingam said the exemptions cannot be granted.
Sebi said it has not found any merit in the application seeking exemption under the takeover regulations with respect to the proposed acquisitions as the trust does not meet the stipulated mandate of disclosure as a 'promoter' for three years prior to the proposed acquisition.
Under Sebi's takeover norms, open offer exemptions are provided for promoter entities, subject to certain conditions.
Exemptions are given in cases of acquisitions pursuant to interse transfer of shares amongst qualifying persons being promoters. This is subject to the conditions that such entities are named as promoters in the shareholding pattern filed by the target company for not less than three years prior to the proposed acquisition.
"I am of the opinion that granting exemption from the said requirement would defeat the very objective why the norms were made stricter," Mahalingam said in the two orders.
Citing the norms, Mahalingam rejected the requests for exempting Neeman Family Foundation (Trust) from open offer obligation with regard to the two companies.
The orders have been passed after taking into consideration the additional submissions, made on three occasions, by the trust since the filing of application in March 2017.
Under the proposed acquisitions, individual promoters of Max Financial and Max Ventures will transfer their stakes to Max Ventures Investment Holdings Pvt Ltd (MVIHPL), which in turn will be majority controlled by the trust.
In the case of Max Financial, the promoter group holds 41.13 per cent stake, out of which 40.95 per cent is proposed to be held through Max MVIHPL.
With regard to Max Ventures, the promoter group owns 38.02 per cent stake in the firm. Out of this total shareholding, 31.55 per cent is proposed to be held through MVIHPL.
Subsequent to the rejig, the trust will be indirectly acquiring over 25 per cent each in both the companies through MVIHPL, as per the proposals mentioned in the two orders.