Sebi Rejects Inox Plea On Guj Fluoro Holding

The Securities and Exchange Board of India has rejected the application of Inox Leasing and Finance Ltd (the acquirer) seeking an exemption from the takeover code to make an acquisiton in Gujarat Flourochemicals Ltd (the target company).

The acquirer proposed to increase its holding in Gujarat Florochemicals to 51 per cent over a period of one year from the open market.

Sebi, after taking recommendations from the takeover panel and the acquirers, has concluded that the acquisition amounts to a "consolidation of holding" by the acquirer in the target company.

"This is much in excess of the 2 per cent stipulation (of creeping acquisitions) under regulation 11(1) of the code. Sebi has agreed with the panel and has directed Inox Leasing to make a public offer as required under the regulations if they are desirious of acquiring the proposed shares." Inox had sought an exemption on the grounds that the share price of the target company in the secondary market is at present abnormally low and this may attract a corporate predator.

 

To ensure that the target company does not fall prey to a domestic or foreign predator, the acquirer was desirious of increasing its equity holding to 51 per cent in the target company. Gujarat Flourochemicals, was promoted jointly by Industrial Oxygen Company and Gujarat Industrial Investment Corporation and by virtue of a recent scheme of reconstruction the shares of the target company held by Industrial Oxygen Company are to be transferred to the acquirers and this would qualify the acquirers to be a ``promoter'' of the target company.

The company has said that the transfer of shares through this scheme has yet to take place and currently the acquirers are not in management control of the target company.

The exemption application was forwarded by the Sebi board to the takeover panel.

The panel considered the facts of the case and recommended that the exemption sought should be refused on the grounds that the management control of the target company is presently not with the acquirers, the totality of the circumstances do not merit an exemption to be granted.