SEBI (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS)

REGULATIONS, 2011

Practice of Corporate Law

SUBMITTED BY- Aayush Soni 19llb003

Gaurav Verma19llb028
Takeover Deal memo by Aayush Soni Associate of associate at M&S
INTRODUCTION TO MEMO
Acquisition is made by Mr. Suresh Atluri (Acquirer 1"), Mr. Surinder Kumar Tikoo ("Acquirer
2"), Mr. Parthasarathi Bhattacharya ("Acquirer 3") and Mr. Satish Kumar Tondapu (Acquirer 4")
(hereinafter collectively referred to as "Acquirers"), Mrs. Sailaja Mannepalli ("PAC 1") and Mr.
Srinivasa Rao Paturi ("PAC 2") (hereinafter collectively referred to as "PAC") to acquire
58,01,200 Equity Shares of Grandeur Products Limited ("GPL""Target Company")
A. NAMES OF THE PARTIES INVOLVED:

1) Name of the Target Company (TC): Grandeur Products Limited

2) Name of Acquirers: Mr. Suresh Atluri ("Acquirer 1"), Mr. Surinder Kumar Tikoo ("Acquirer
2"), Mr. Parthasarathi Bhattacharya ("Acquirer 3") and Mr. Satish Kumar Tondapu ("Acquirer 4)

3) Persons Acting in the concert with the Acquirers (PAC(s)): Mrs. Sailaja Mannepalli (PAC 1")
and Mr. Srinivasa Rao Paturi ("PAC 2")

4) Name of the Manager to the Offer Mark Corporate Advisors Private Limited

ABOUT TARGET COMPANY

The Target Company, was incorporated on January 03, 1983 in the name of ‘Chhajer Commercial
Company Limited’ in West Bengal pursuant to the provisions of the Companies Act, 1956.
Subsequently, the name of the Company was changed to ‘Vidyut Commercial Limited’ vide
certificate dated May 20, 1993. The name was further changed to ‘Bul Steels and Energy Limited’
vide Certificate of Incorporation dated July 15, 2008. Thereafter, the name was changed to
‘Grandeur Products Limited’ and a fresh Certificate of Incorporation was issued on April 17, 2013
by RoC, Kolkata. 2) The Registered Office of the Target Company is presently situated at H No.1-
62-192, 3rd Floor, Dwaraka Avenue, Kavuri Hills, Madhapur, Hyderabad-500 033. 3) The Target
Company is in the Business of seed research, production and marketing.1

1
Detailed public statement available at GRANDEUR PRODUCTS LIMITED_Full Page Ad_15 January 2019.pmd
(sebi.gov.in)
SUMMARY OF THE DEAL

All the acquirers along with PACs were holding together 22,97,690. Which was 10.30 per cent of
Shares.

On 10th January 2019, The Acquirers and the PACs have entered into a Share Purchase Agreement
(“SPA”) with the existing Promoter/Promoter Group (the “Selling Shareholders”/ “Sellers”) to
acquire
From Mr. Visweswara Rao and Mr. Jayaramaprasad Munnangi who were the promoter of the
company and held 30,95,000 Equity shares and13.87% equity share capital, out of which acquirer
purchased 28,85,000 Equity Shares at 40 each representing 12.93% of the Equity Share Capital of
the Target Company.
Post this SPA Acquirer and Pac became holder of 51,82,690 which was 23. 23 % of Equity share
capital

In accordance with SPA, the Acquirers and the PACs made an Public Offer2 in terms of Regulation
3(1) and 4 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 to
acquire up to 58,01,200 Equity Shares of ` 10 each, representing 26% of the Equity Share Capital
of the Target Company (“Offer Size”) at a price of ` 40 (Rupee Forty only) per Equity Share
(“Offer Price”), payable in cash.

The Object of the acquisition is substantial acquisition of Shares/Voting Rights accompanied by

controlling the Management of the Target Company.

In response to open offer Shares acquired are 2,25,000 of 40 each for which consideration payable
in cash -90,00,000 ₹

Hence post offer shareholding of acquirers and PACs are 54,07,690 of 24.24% share capital of
target company.3

2
SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
Available at https://www.sebi.gov.in/legal/regulations/apr-2017/sebi-substantial-acquisition-of-shares-and-
takeovers-regulations-2011-last-amended-on-march-6-2017-_34693.html
Last amended on March 6 , 2017
What triggered Open offer requirement

There was a Share Purchase Agreement dated on 10th January 2019 of 28,85,000 number of shares
which was 12.93% of total equity share capital of the company for a Consideration of 40₹ each for
which total consideration for share was 11,54,00,000 rp in cash.
It triggered the section 3(1) and 4 of “SAST Regulations, 2011”.4

Consideration

The Number of shares which was proposed to be acquired by Open offer were 58,01,200 equity
shares was issued at a consideration/offer price or 40₹. Out of which 2,25,000 shares were tendered
hence total consideration which was payable by cash 90,00,000₹ on May 3, 2019.
Offer Price was Determined According to regulation 8 Of SAST regulation. According to not
frequently traded company.

Sr.no Particulars Amount

(In₹`)
a Negotiated Price as per SPA 40
b The volume-weighted average price paid or payable for acquisition 40
whether by the Acquirers and the PACs, during 52 weeks
preceding the date of PA
c The highest price paid or payable for any acquisition, by the 40
Acquirers and the PACs, during 26 weeks preceding the date of
the PA
d The volume-weighted average market price of Equity shares of the Not
Target Company for a period of sixty (60) trading days Applicable
immediately preceding the date of PA as traded on BSE, being the
Stock Exchange where the maximum volume of trading in the
shares of the Target Company are recorded during such period, the
Equity Shares being infrequently traded

e Other Financial Parameters as at: September 30,

2018
(Certified/Un-
Audited)
(i) Return on Net worth (% Negative
f (ii) Book Value Per Share (₹) 20.99
(iii) Earnings Per Share (₹) Negative

4
Grandeur Product Ltd. Public Announcement under sec 3(1) , sec 4 of SEBI (Substantial Acquisition of Shares and
Takeovers) Regulations, 2011
Available at https://www.sebi.gov.in/sebi_data/commondocs/jan-2019/Grandeur%20Products%20Ltd.%20-
%20Public%20Announcement_p.pdf
Recommendation of IDC

Committee of Independent Directors ("IDC") of the Target Company has issued the following
recommendation (relevant extract) on the Offer, which was published on April 04, 2019
(Thursday) in the above mentioned newspapers:

Recommendation on the Open Offer- IDC is of the view that Open Offer is fair and reasonable.

Summary of reasons for IDC has taken into consideration the following for making the
recommendation

 IDC has reviewed (a) The Public Announcement ("PA") dated January 10, 2019 in
connection with the Offer issued on behalf of the Acquirers/PACs (b) The Detailed Public
Statement ("DPS") which was published on January 17, 2019 and (c) The Letter of Offer
("LOF") dated March 28, 2019.

 Based on the review of PA, DPS and LoF, the IDC is of the opinion that the Offer Price of
40.00 (Rupees Forty only) per Equity Share offered by the Acquirers/PACS (more than the
highest price amongst the selective criteria mentioned under Justification of Offer Price) is
in line with the regulation prescribed by SEBI under the Regulations and prima facie
appears to be justified.5

5
GRANDEUR PRODUCTS LIMITED_IDC_3 April 2019.pmd (sebi.gov.in)
 Timeline of the deal

Nature of Activity Original schedule Revised schedue

Date of the PA Jan10, 2019 Jan10, 2019

Date of publishing the Detailed Public Statement Jan 17, 2019 Jan 17 , 2019

Last date for filing of Draft Letter of Offer with SEBI Jan 22 , 2019 Jan 22, 2019

Date of sending a copy of DLof to the TC and the concerned Jab 22, 2019 Jan 22, 2019
stock exchanges

Latest date by which SEBI’s observations will be received Feb 12, 2019 March 20, 2019

Last date by which the Letter of Offer will be dispatched to the April 01, 2019 March 30, 2019
Shareholders

Last date by which the recommendation of the committee of April 04, 2019 April 04, 2019
Independent Directors of the Target Company will be given and
published
Last Date for revising the Offer Price/number of shares April 05, 2019 April 05, 2019

Date of Commencement of the Tendering Period (“Offer April 08, 2019 April 08, 2019
Opening date”)

Date of Closing of the Tendering Period (“Offer Closing date”) April 23, 2019 April 23, 2019

Last date for communicating Rejection/acceptance and payment May 08, 2019 May 03, 2019
of March 27, 2019 Wednesday consideration for accepted equity
shares or equity share certificate/return of unaccepted share
certificates/credit of unaccepted shares to demat account
Required Approvals

As on date, to the best of knowledge and belief of the Acquirers and the PACs, there are no other
statutory approvals required to acquire the equity shares tendered pursuant to this Offer. If any
other statutory approvals are required or become applicable at a later date before the completion
of the Offer, the Offer would be subject to the receipt of such other statutory approvals. The
Acquirers and the PACs will not proceed with the Offer in the event such statutory approvals are
refused in terms of Regulation 23 of the Regulations.

Five Sections of the SEBI Takeover Code, 2011 that are implicated
1)Section 3(1) which states that- No acquirer shall acquire shares or voting rights in a target
company which taken together with shares or voting rights, if any, held by him and by persons
acting in concert with him in such target company, entitle them to exercise twenty-five per cent or
more of the voting rights in such target company unless the acquirer makes a public announcement
of an open offer for acquiring shares of such target company in accordance with these regulations.
Hence it is a triggered offer under regulation 3 (1) as they are acquiring 28,85,000 Equity Shares
of Face Value of ` 10 (Rupee Ten only) each at a price of ` 40 (Rupees Forty only) per share
representing 12.93% of the Equity Share Capital from the promoters of the company through SPA.

2) Acquisition of control. Section.4. -Irrespective of acquisition or holding of shares or voting

rights in a target company, no acquirer shall acquire, directly or indirectly, control over such target
company unless the acquirer makes a public announcement of an open offer for acquiring shares
of such target company in accordance with these regulations.
Hence while after acquiring 12.93% of the equity share capital the acquirers make public offer of
the announcement
3)Infrequently traded shares Under section 2 (j) 6
Name of Stock Total Number of Total no. of Equity Annualized trading
exchange Shares traded shares listed turnover (as % of
during the total no. of listed
preceding 12 shares)
calendar Months
prior to the month
of PA
BSE Ltd 65,140 2,23,11,960 0.29 %
According to the regulation there must be trading of at least 10% of total shares listed to be called
as Frequently traded company
Based on the above, the Equity Shares of the Target Company are infrequently traded
during twelve (12) calendar months preceding the calendar month in which PA is made
within the meaning of explanation provided in Regulation 2(j) of the Regulations

4)Regulation 8 Offer Price - Offer price is the price at which the acquirer announces to acquire
shares from the public shareholders under the open offer. The offer price shall not be less than the
price as calculated under regulation 8 of the SAST Regulations, 2011 for frequently or infrequently
traded shares.
There are 4 conditions under which, the highest price will be the offer price in case of
infrequently traded company.
If the target company’s shares are infrequently traded, then the open offer price for
acquisition of shares under the minimum open offer shall be highest of the following
1. Highest negotiated price per share under the share purchase agreement (“SPA”)
triggering the offer;
2. Volume weighted average price of shares acquired by the acquirer during 52 weeks
preceding the public announcement (“PA”);
3. Highest price paid for any acquisition by the acquirer during 26 weeks immediately
preceding the PA;
4. The price determined by the acquirer and the manager to the open offer after taking
into account valuation parameters including book value, comparable trading
multiples, and such other parameters that are customary for valuation of shares of
such companies. Hence Offer price of 40₹ per share was announced in public offer

6
Regulation 2(j) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 [last
amended on March 6, 2017]
available at https://www.sebi.gov.in/legal/regulations/apr-2017/sebi-substantial-acquisition-of-shares-
and-takeovers-regulations-2011-last-amended-on-march-6-2017-_34693.html
 Current status of the deal (Specify Post-Deal Holdings)

PRE AND POST OFFER SHAREHOLDING OF THE Acquirer in the target

company

Shareholdings of Acquirers before Public announcement was 22,97, 690 shares with which
they had 10.30% of share capital in Target company.
After Share Purchase Agreement of 28,85,000 and shares acquired in the Open offer
2,25,000.
Post offer Shareholding of acquirer became -No. of shares 54,07,690 and 24.24 % of share
capital of Target company.7

PRE AND POST OFFER STATUS OF THE COMPANY

Sr. No Class of Entities Pre Offer Pre offer Post OFFER Post Offer
% of the % of Voting
No. of shares voting capital No. of shares Capital

Acquirers / PACs 22,97,690 10.30 54,07,690 24.24%

1
Erstwhile Promoters 31,95,000 14.32% 3,10,000 1.39%
2
Other Public Shareholders 1,68,19,270 75.38% 1,65,94,270 74.37%
3
TOTAL 2,23,11,960 100.00% 2,23,11,960 100%

7
Post Offer report available at https://www.sebi.gov.in/sebi_data/commondocs/may-
2019/Grandeur%20Products%20Ltd%20-%20Post%20Offer%20Report_p.pdf