Mergers and Purchases Code: 563A
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✓ Failure to comply with the above Four guidance would cause rejection of assignment.
✓ You will find four Questions in this job. The student should answer each of the four inquiries. Marks allocated 100.
✓ Each Issue carries similar marks (25 marks) unless of course specified clearly
Question Simply no 1
Desi Textiles Limited. was incorporated in 1920. Ramchandra Rao, promoter from the company, was follower with the ‘Swadesi Movement' and started this company while using objectives of — (i) generating work for Indians; (ii) providing good selling price to the cotton growers; and (iii) offering quality fabric to the owners at affordable prices. Slogan of the firm was ‘for Indians, by Indians associated with Indians'. The business was being run like a trust with nominal profits. The company did well till eighties and was well maintained by the second and third technology of promoters. Due to changing business environment and complications like adverse government plans, advancement in technologies, fierce competition by foreign corporations, opening-up of economy, you can actually health damaged. At present, the factory is operating at 60% of its capacity. You will find statutory fails and it is a capital deprived company, consequently, cannot change old machinery. Fourth technology promoters don�t have the capacity to make capital themselves. However , looking at the intangibles of Desi Textiles Limited., like brand equity, devoted staff, and tangibles like — area and building, one of the foreign investors called by Desi Textile Limited. through a lot of intermediary is willing to include required cash in favored capital around the condition that 50% in the Board members (6 away of 12 directors) can be nominated by simply them as well as the managing movie director would become of their own choice.
The intermediary also introduced for dialogue another foreign company, interested as Worldwide Trading Residence. This international company, after proper overview, expressed determination to invest required funds within the condition that it may have 33% share inside the equity of Desi Materials Ltd. against which it will supply equipment matching certain requirements of modern day fashion world to change old and unusable machinery and it must be the sole marketing agent of the products of Desi Materials Ltd. in Europe. In addition, it demanded 6th positions of directors such as position from the managing representative. Prakash, the great-grandson of Ramchandra Rao, is in a dilemma mainly because such infusion of overseas capital and changing formula of the Plank with overseas nominees could hit at the very objective/purpose of the incorporation as an element of Swadesi Activity. One more option was looked into when Prakash approached an Indian industrialist who agreed to infuse the required capital on the condition of obtaining 74% risk in the equity share capital and several nominees on the Board out of 12 directors as well as the position of the managing director. This proposal was not satisfactory to Prakash because he was losing the control around the affairs with the company with no corresponding account to him. If this individual refuses to recognize any of the over proposals, the corporation has no potential for survival.
Question No 2:
a) What is ‘creeping acquisition'? Discuss the provisions of the SEBI (Substantial Acquisition of Stocks and shares and Takeovers) Regulations, 1997.
b) Allen Ltd., a listed company, is taking into consideration merger of Ben Limited. which is also a listed organization, with on its own through cut...