The Hindu Business Line : SEBI exempts Revathi Equipment promoters from buyback norm

The Securities and Exchange Board of India (SEBI) has exempted the promoters of Coimbatore-based Revathi Equipment Ltd, a mining equipment manufacturer, from making a public announcement of the buyback of equity shares.

Utkal Investments and Renaissance Asset Management Company, which are the promoters, currently hold 60.87 per cent of the equity shares of the company, which has announced buyback of equity shares from shareholders at a price not exceeding Rs 700 a share.

Because of the buyback, the voting rights of the promoters would go up from 60.87 per cent to 63.71 per cent in case of 100 per cent response to the buyback plan.

In his order, Mr G. Anantharaman, Wholetime Member of the SEBI, said that the promoters had sought exemption from the applicability of regulation 11(2) of the takeover regulations on the grounds that they are already in control of the company and the increase in voting rights was incidental to the buyback proposal and was "not an active acquisition."

Even after the buyback offer sailing through, the public shareholding in the company would be at a level more than that required for meeting the requirements of the listing agreements.

The company argued that the proposed buyback price of Rs 700 was higher than the book value of Rs 312.07 a share (maximum cap) and the idea was to maximise returns to investors and enhance overall shareholder value by returning surplus cash to shareholders in an investor-friendly manner.

The buyback is expected to lead to reduction in outstanding equity shares that might lead to increase in earnings per share and return on equity, creating long- term shareholder value.

The acquirers did not propose to acquire a single share of the target company either directly or indirectly and would not offer any shares in the buyback.

(The company's board had earlier decided that the mode of buyback would be through the open market and the maximum amount to be spent on buyback was Rs 10 crore, representing approximately 10 per cent of the equity capital and free reserves as on March 31, 2006.

While the paid-up capital was Rs 3.21 crore, the reserves excluding revaluation reserve stood at Rs 96.97 crore at the end of the last fiscal).

The Takeover Panel, to which SEBI had forwarded the application, ruled that it was "a fit case for grant of exemption as proposed for."

Mr Anantharaman, agreeing with the recommendation, in his order dated January 5, granted exemption to the acquirers.

After the completion of the proposed share acquisition, the number of shares held by the promoter group would remain the same at 19,53,809 shares as before the acquisition, but in percentage terms it would go up from 60.87 per cent to 63.71 per cent of the equity after the buyback.

The Revathi Equipment scrip closed at Rs 659 on the NSE today; the volume of shares traded was a modest 1,782.

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