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Thursday, May 15, 2014

Marg Ltd (Rs.14.70): Will the scrip now shoot to Rs.70-80? 
[Editor: According to the report published in Economic Times on December, 14, 2012: Capital market regulator SEBI directed the promoters of Chennai-based Marg Infrastructure to raise its open offer price four times due to repeated violation of the takeover code. As against a 'voluntary' open offer proposed at Rs.91 a share, the promoters were directed to make a 'mandatory' open offer at around Rs.340. In October '11, Marg promoters announced a voluntary open offer to acquire up to 76.5 lakh shares, or 20% of diluted capital, at Rs.91. But after the documents were filed with Sebi, the regulator detected violations of the takeover code that prevents acquisition of shares in excess of 5% a year.  According to sources, Sebi has told the promoters to announce an open offer based on prices prevailing at that time, which comes to around Rs.216. Together with interest, the open offer price, as per regulatory order, will be Rs 340 per share. Now with honourable Supreme Court ruling that corporates will not be allowed to withdraw open offers on grounds that the offer has become uneconomical or lacks commercial reasonableness, makes a strong case for the SHARE PRICE to MOVE UP]
May 3, 2014:  Supreme Court Judgment: Whether an open offer voluntarily made through a Public Announcement for purchase of shares of the target company can be permitted to be withdrawn at a time when the voluntary open offer has become uneconomical to be performed ???

The Supreme Court has delivered the important judgment in Civil Appeal No. 6041 of 2013 in Securities and Exchange Board of India vs. M/s. Akshya Infrastructure Pvt. Ltd., settling the position regarding India Inc’s responsibility to open offers. A Supreme Court Bench while dealing with the fundamental issue that whether an open offer voluntarily made through a Public Announcement for purchase of shares of the target company can be permitted to be withdrawn at a time when the voluntary open offer has become uneconomical to be performed, has ruled that corporates will not be allowed to withdraw open offers on grounds that the offer has become uneconomical or lacks commercial reasonableness. The Apex Court further held that any delay by the market regulator SEBI in replying to open offer applications couldn’t be cited by corporates to back out of open offers.

Once an open offer is made through public announcement it can’t be withdrawn later if it becomes uneconomical.
FACTS:
(a) Akshya Infra is part of the promoter group of Marg Limited and had breached the 5% creeping acquisition limit in the target company Marg Limited in years 2006-07, 2007-08 and 2010-11. under regulation 11 of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
(b) On 20th October 2011, Respondent company made a voluntary open offer wherein the public shareholders of Marg Limited were given an opportunity to exit at an offer price of rupees 91/share. But on 29th March 2012, Akshya Infra alleged groundless delay by SEBI in approving the draft letter of offer and sought to withdraw of Rs.17.46 Cr. from escrow account for the open offer.
The claim of the company was that the regulator’s delay had rendered the complete open offer exercise worthless and that the offer lacked economic reasoning and commercial reasonableness.
(c) After unjustified delay, SEBI by letter dated 30th November, 2012 conveyed its comments on draft letter of offer however; no reference was made regarding request for withdrawal of offer.
(d) The respondent challenged SEBI’s comment before SAT.
(e) The SAT however didn’t make any observation on merits of the issue. SEBI found that that allowing Akshya Infra to withdraw the public offer would be damaging to the overall interest of the shareholders.
(f) Aggrieved-appellant, filed the instant civil petition before the Supreme Court.
JUDGEMENT
(1) The respondent was required to comply with Regulation 11 and make a Public Announcement to acquire shares in accordance with law.
(2) Non receipt of timely information from respondent was not ground for the SEBI – appellant to delay issuance of comments on letter of offer.
(3) SEBI is the watchdog of the Securities Market, It is the guardian of the interest of the shareholders Therefore, SEBI ought not to act in a lackadaisical manner in the performance of its duties.
(4) Delay on part of SEBI would not result in nullifying the actions taken by it, even though belated.
(5) Permitting the respondent to withdraw the public offer would be detrimental to the overall interest of the shareholders. As it would defeat the very purpose of Take over code.
(6) There can be no distinction between a triggered public offer and a voluntary public offer both have to be considered on an equal footing.
(7) In view of above, the appeal is allowed. The impugned order passed by the SAT is set aside and the directions issued by the appellant in the letter dated 30th November, 2012 are restored.

Courtesy: RMG & Associates
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