Essar Ropes In Legal Eagles To Endorse Stand

Bigwigs from law and merchant banking have been roped in by the Essar group to support its claim that the groups acquisition of Sterling Computers (SCL) does not fall within the purview of the Securities and Exchange Board of Indias (Sebi) takeover code.

Essar is not legally required to make a public offer to the people holding shares in Sterling Computers, a company official said.

But to be on the right side of the law, however ambiguous it may be, we decided to make an open offer to acquire 20 per cent public holding in SCL, the spokesman added.

The company claimed the best legal opinion obtained by the group supports the view that the acquisition of Sterling Computers, by buying up investment outfits holding controlling stake in SCL, does not fall within the purview of Sebi for substantial acquisition of shares and takeovers.

 

The group, through its investment arm, Essar Investments, and other companies had taken over three investment firms, Kartik Software Consultants, Saravana Exports and Shanmuga Consultants.

The three privately held companies of Sivasankaran and family owned 40 lakh shares, equivalent to 80 per cent stake, of Sterling Computers, a listed company.

Despite having taken a stand that the Sterling Computers acquisition does not fall under Sebi stipulations, the group hired J M Financial and Investment to float an open offer. Its own subsidiary, India Securities, is acting as advisor to the offer.

The Ruias have roped in Justice P N Bhagawati, who headed the Sebi committee to draft a fresh code for substantial acquisition of shares and takeovers, to defend their decision that the open offer need not be made in respect of the Sterling Computers takeover.

R A Shah, another important member of the committee, said, the stand taken by Essar was right as the law is silent on indirect takeover.

Speaking from Mumbai, the official said, we have taken all precautions to ensure that the transaction was transparent and no regulatory authority has any reservation over the deal.

This is a unique case not covered by the 1994 Sebi guidelines, merchant bankers commenting on the acquisition said.

According to merchant banking circles, Justice Bhagawati has lent legal opinion to the Ruias by saying that it is okay even if they do not make an open offer to buy the public holding in Sterling Computers.