2020 (2) TMI 873 - AT - SEBI

Default in price offered by the acquirers - open offer eligibility - entitlement of all shareholders for receiving interest - offer price made by the acquirers was grossly inadequate as the Target Company GTL had a plot of land worth about ₹ 2000 crore which was not reflected in the said valuation - HELD THAT - The appellant, instead of emphasizing the relevant facts over-emphasized three valuation reports and the infrequently traded nature of GTL shares in 2018 which has no relevance and sought interest to all shareholders etc. which is untenable. The crux of the matter is simple; whether the price offered by the acquirers and the interest paid thereon to certain shareholders are in consonance with the applicable regulatory provisions and Court orders thereon. Clearly for frequently traded shares Sub Regulation 20(4) is applicable and if an open offer has been made under Takeover Regulations 1997 that process has to be completed under the same Regulations as is explicitly stated in Sub Regulation 35(2)(c) of the new Takeover Regulations 2011. Here, it is an undisputed fact that the trigger for public announcement / open offer came on November 12, 2009 and consequently public announcement was made. Though the open offer was delayed on account of the subsequent stand (for recalling the public announcement) taken by the acquirers the original date of trigger does not change. The valuation done as per the applicable methodology under Regulation 20(4) is not questioned; what is questioned is the valuation in 2018 which is not applicable in the matter. When the offer price of ₹ 101/- per share was made based on the price given by the acquirers in 2009 what is implemented here is the same price. Moreover, since the market price captures the intrinsic value of the GTL shares including GTL's properties, assets etc. in 2009 and since it was a frequently traded share rightly no valuation was necessary as per the applicable Regulations. It is also an undisputed fact that interest to original shareholders who tendered their shares have been given by the acquirers @ ₹ 60.25 per share and for other shareholders @ ₹ 0.45 - we find no merit in the submissions made by the appellant regarding either the offer price or the entitlement of all shareholders for receiving interest.

Summary

Issues:
- Dispute over offer price and interest payment in open offer
- Delay in implementing open offer from 2010 to 2018
- Valuation of shares and assets of the Target Company
- Applicability of regulatory provisions and court orders

Analysis:

1. Dispute over Offer Price and Interest Payment:
The appellant challenged the offer price by the acquirers and sought a revision to ?800 per share. Additionally, the appellant argued that all shareholders who surrendered shares should receive interest from 2010 to 2018 due to delays in implementing the open offer. The respondent SEBI contended that the process was completed, rendering the appeal moot. The acquirer's counsel supported SEBI's position, emphasizing compliance with regulatory provisions.

2. Delay in Implementing Open Offer:
The acquirers initially proposed an open offer in 2009 but sought to withdraw it in 2011 due to delays. Despite legal battles, the offer was finally implemented in 2018. The appellant argued that the delay impacted the valuation and shareholders' entitlement to interest, while SEBI and the acquirer maintained that the process was completed as per regulations.

3. Valuation of Shares and Assets:
The appellant questioned the valuation report prepared by the acquirers, alleging it undervalued the Target Company's assets. The appellant also criticized the qualifications of the Chartered Accountant who conducted the valuation. The respondent SEBI and the acquirer's counsel argued that the valuation was in line with regulatory requirements and court precedents.

4. Applicability of Regulatory Provisions and Court Orders:
The Tribunal analyzed the relevant regulatory provisions, particularly Sub-Regulation 20(4) of the Takeover Regulations 1997, and Sub-Regulation 35(2)(c) of the Takeover Regulations 2011. It concluded that the offer price and interest payments were in compliance with the applicable regulations and court decisions. The Tribunal dismissed the appeal, citing no merit in the appellant's arguments regarding pricing and interest entitlement.

In summary, the judgment addressed the dispute over offer price, delays in the open offer, valuation concerns, and the adherence to regulatory provisions and court orders. The Tribunal found the appellant's claims unsubstantiated, ruling in favor of the respondents and dismissing the appeal without costs.