Adjudication Order in respect of Kotak Mahindra Capital Company Limited, Edelweiss Financial Services Limited, IDBI Capital Market Services Limited, DSP Merrill Lynch Limited, ICICI

8/10/2019 Adjudication Order in respect of Kotak Mahindra Capital Company Limited, Edelweiss Financial Services Limited, ID

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______________________________________________________________________________________AdjudicationOrderinthematterofInitialPublicOfferofCreditAnalysisandResearchLimited(CARE)Page1of86

BEFORETHEADJUDICATINGOFFICER

SECURITIESANDEXCHANGEBOARDOFINDIA

[ADJUDICATIONORDERNO.AK/AO/221226/2014]

________________________________________________________________________

UNDERSECTION15IOFSECURITIESANDEXCHANGEBOARDOFINDIAACT,1992READWITH

RULE5OF

SEBI

(PROCEDURE

FOR

HOLDING

INQUIRY

AND

IMPOSING

PENALTIES

BY

ADJUDICATINGOFFICER)RULES,1995

Inrespectof

M/s.KotakMahindraCapitalCompanyLimited (PAN:AAACK5577D);M/s.DSPMerrillLynch

Limited (PAN:AAACD0535G);M/s. Edelweiss Financial Services Limited (PAN:AAACE1461E);

M/s. ICICI Securities Limited (PAN: AAACI0996E);M/s. IDBICapitalMarket Services Limited

(PAN:AAACI1268F);M/s.SBICapitalMarketServicesLimited(PAN:AAACS7914E)

Inthematterof

InitialPublicOfferofCreditAnalysisandResearchLimited(CARE)

________________________________________________________________________

FACTSOFTHECASE

1. M/s. Kotak Mahindra Capital Company Limited, M/s. DSP Merrill Lynch Limited, M/s

EdelweissFinancialServicesLimited,M/s.ICICISecuritiesLimited,M/s.IDBICapitalMarket

ServicesLimitedandM/s.SBICapitalMarketsLimited (hereinaftercollectivelyreferredto

asBookRunningLeadManagersBRLMs/theNoticees)hadfiledRedHerringProspectus

(hereinafterreferredtoasRHP)fortheInitialPublicOffer ofCreditAnalysisandResearch

Limited(hereinafterreferredtoasCARE/Issuer/Company)withSecuritiesandExchange

Boardof India (hereinafter referred to as SEBI)on November 27, 2012 for initialpublic

offer(hereinafterreferredtoasIPO)of71,99,700equitysharesofafacevalueofRs.10/

eachofthecompanythroughanOfferforSale(hereinafterreferredtoastheOffer).

2.

TheOffer

opened

for

subscription

by

anchor

investors

on

December

06,

2012

and

closed

on

thesameday.TheOfferopenedforpublicsubscriptiononDecember07,2012andclosed

onDecember11,2012.

3.

ItwasobservedthatCAREhadreceivedaletterdatedSeptember26,2012fromtheReserve

BankofIndia(hereinafterreferredtoasRBI),inresponsetoCAREsletterdatedAugust31,

Brought to you by http://StockViz.biz


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2012,agreeingtoexemptnonresidentinvestorsparticipatingintheOfferforSale,fromthe

requirementofobtainingaNoObjectionCertificate(hereinafterreferredtoasNoC)from

their respective regulators in relation to theirparticipation intheOffer,subject tocertain

conditions. OneoftheconditionsstipulatedbyRBIwhileexemptingnonresidentinvestors

participatingin

the

Offer

from

obtaining

NoCs

from

the

respective

regulators

was

that

minimumcapitalizationnormsapplicabletoNonBankingFinancialCompanies (NBFCs)are

strictlyadheredtobyCARE.Subsequenttothesame,itwasobservedthatCAREhadwritten

toRBIvideletterdatedOctober05,2012 interaliastatingthereinthat(a)investmentby

ForeignInstitutionalInvestors(hereinafterreferredtoasFIIs)andsubaccountsregistered

with SEBI and investing in the Offer under the Portfolio Investment Scheme (hereinafter

referredtoasPIS)inaccordancewithRegulation5(2)andSchedule2ofForeignExchange

Management(TransferofIssueofSecuritybyaPersonResidentOutsideIndia)Regulations,

2000,asamended(hereinafterreferredtoasFEMARegulations);(b)NonResidentIndians

(hereinafter referred to as NRIs) investing in theOfferonnonrepatriationbasisunder

Regulation5(3)(ii)andSchedule4ofFEMARegulations; and(c)QualifiedForeignInvestors

(hereinafterreferredtoasQFIs)investingintheOfferinaccordancewiththeprovisionsof

theMasterCircularonForeign Investments in IndiadatedJuly02,2012 issuedbyRBI,will

notbea foreigndirect investment,and thatRegulation5(1) readwithSchedule1of the

FEMA Regulations and the conditions applicable for foreign direct investments including

minimum

capitalization

norms

prescribed

in

the

Consolidated

Foreign

Direct

Investment

(hereinafter referred toas FDI)Policyand theMasterCircularonForeign Investments in

NonBanking Financial Companies engaged in nonfund based activities, shall not be

applicabletothecompanyinrespectoftheOffer.Itwasfurtherobservedthatthecompany

andBRLMshadproceededwiththeissueintheabsenceofanyresponsefromRBI.

4.

Itwas furtherobserved thatas regards theaforesaid, limiteddisclosurewasmade in the

RHPonpage228and322bystatingthat"RBIbyletterdatedSeptember26,2012exempted

eligibleNon

Residents,

in

their

capacity

as

transferee

entities,

from

the

requirement

to

obtainanoobjectioncertificatefromtheirrespectiveregulatorsinrelationtoparticipating

intheOffer."FurtherPage116oftheRHPunderRegulationsandPoliciesprovidinggeneral

informationtotheinvestors,thefollowingstatementwasincorporatedunderthesubpara

Consolidated FDI Policy In case of nonbankingfinancial companies undertaking non

fundbasedactivities,whichincludecreditratingagencies,USD0.5millionshouldbebrought



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inupfrontbytheforeigninvestorirrespectiveofthelevelofforeigninvestment.Itwas,thus,

observed that the disclosure in the RHP did not mention the conditional nature of the

exemption granted by RBI to the nonresident investors while exempting them from

obtainingaNoCfromtheirrespectiveregulators inrelationtoparticipating intheOffer. It

wasalso

observed

that

even

the

factual

aspect

of

filing

of

letter

dated

October

05,

2012

withRBI subsequent to receiptofRBIs letterdatedSeptember26,2012,wherein itwas

broughtoutthatinvestmentsbyFIIs,NRIsandQFIsparticipatingintheOffershallnotbeFDI

and the conditionsapplicable toFDI includingminimum capitalizationnorms shallnotbe

applicabletotheOffer,wasalsonotdisclosedintheRHP.

5. The issueopenedforanchor investorsonDecember06,2012andclosedonthesameday.

Onthesamedayi.e.December06,2012,thecompanyreceivedaletterfromRBIinreplyto

companysletterdatedOctober05,2012clarifyingthat:

i.

FIIscanacquiresharesundertheproposedofferforsaleprovidedtotalshareholdingof

FII in the company shall not exceed 10% at any point of time and minimum

capitalizationnormsareadheredto;

ii. QFIscanacquiresharesundertheproposedofferforsaleprovidedtotalshareholdingof

QFIinthecompanyshallnotexceed5%atanypointoftimeandminimumcapitalization

normsareadheredto.

6.

CARE vide its letter dated December 07, 2012 again represented to RBI by inter alia

reiterating that no foreign direct investment (by any nonresident investors under

Regulation5(1) readwithSchedule Iof theFEMARegulations)willbepermitted into the

company under the Offer and that they have specifically prohibited investmentsby non

resident investors. ItwasfurthersubmittedthereintoRBIthat in lightofthesame, itwas

the companys understanding that the minimum capitalization norms set forth in clause

6.2.24oftheConsolidatedFDIPolicydatedApril10,2012(CircularIof2012)andtheMaster

Circularwill

not

be

required

to

be

met

with

respect

to

investment

by

Eligible

FIIs

and

Eligible

QFIsintheOffer.Videtheaforesaidletter,itwasalsobroughttothenoticeofRBIthatthe

offeropenedforsubscriptionforanchorinvestorsonDecember06,2012andthattheoffer

wouldopen for subscription forother categoriesof investorsonDecember07,2012and

wouldcloseonDecember11,2012.



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7. However,itisobservedfromsubsequentletterdatedDecember10,2012fromCAREtoRBI

thatfurthertodiscussionswithRBI inthematter,thecompanyunderstoodthatminimum

capitalizationnormsmust be satisfied in relation to the Offer. Accordingly, vide the said

letterCAREinteraliaapproachedRBIseekingninemonthstimefromthedateofallotment

inthe

Offer

to

comply

with

the

minimum

capitalisation

norms.

RBI

vide

its

letter

of

the

same

datei.e.December10,2012allowedCAREsixmonthstimefromthedateoftheissueofthe

lettertocomplywiththeminimumcapitalisationnormsofUS$0.5millionapplicabletonon

fundbasedNBFCs.AccordinglyacorrigendumwasissuedbyCAREonDecember11,2012.

APPOINTMENTOFADJUDICATINGOFFICER

8. The undersigned was appointed as the Adjudicating Officer vide order dated August 13,

2013 under rule 4 of SEBI (Procedure for Holding Inquiry and Imposing Penalties by

AdjudicatingOfficer)Rules,1995(hereinafterreferredtoasRules)readwithSection15Iof

SEBI Act to inquire into and adjudge under Section 15HB of the SEBI Act, the alleged

violations of the provisions of SEBI (Issue of Capital and Disclosure Requirement)

Regulations, 2009 (hereinafter referred to as ICDR Regulations) and SEBI (Merchant

Bankers)Regulations,1992(hereinafterreferredtoasMerchantBankers Regulations).

SHOW

CAUSE

NOTICE,

HEARING

AND

REPLY

9. Show Cause Notice No. EAD6/AK/VS/25633/2013, EAD6/AK/VS/25634/2013, EAD

6/AK/VS/25635/2013, EAD6/AK/VS/25636/2013, EAD6/AK/VS/25637/2013 and EAD

6/AK/VS/25638/2013datedOctober07,2013(hereinafterreferredtoasSCN)wereissued

totheBRLMs/theNoticeesunder rule4oftheRules toshowcauseas towhyan inquiry

should not be held and penalty be not imposed under Section 15HB of SEBI Act for the

allegedviolationspecifiedinthesaidSCN.ThesaidSCNsweredeliveredandacknowledged

bythe

BRLMs/

Noticees.

The

BRLMs/

Noticees

vide

letter

dated

October

18,

2013

sought

additionaltimeoffourweekstosubmittheirresponsetotheSCN,whichwasaccededto.

TheBRLMs/Noticeeswere informedvideemaildatedOctober22,2013tofilereplytothe

SCN latest by November 20, 2013. Vide individual letters dated October 28, 2013/

November11,2013,asapplicable,theBRLMs/Noticeessubmittedcopiesofvakalatnamas

appointingM/s.Amarchand&Mangaldas&SureshA.Shroff&Co.(hereinafterreferredto



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astheAuthorisedLegalRepresentativesALR)toact,appearandpleadontheirbehalf.Vide

letterdatedNovember11,2013,theALRonbehalfoftheBRLMs/Noticeesinteraliasought

fortheinspectionofdocumentswhichwasrelieduponintheSCNtoframetheallegations/

findings in the notices issued.Videemaildated November13,2013,ALRwas advised to

specifythe

documents

sought

for

inspection.

Vide

letter

dated

November

15,

2013,

ALR

interaliasubmitted the following listofdocuments that they intended toexamineat the

inspection:

a) Order of theWholeTimeMemberof SEBI (herein after referred to as WTM) dated

August13,2013appointingtheAdjudicatingOfficer;

b) CommunicationofappointmentoftheAdjudicatingOfficerdatedOctober4,2013;

c) DocumentarybasisfortheWTMtobesatisfiedof(i)primafacie inadequatedisclosure

of theconditionalexemptiongrantedby the letter from theRBIdatedSeptember26,

2012andconsequentviolationoftheprovisionsoftheICDRRegulationsandMerchant

Bankers Regulations; and (ii) sufficiency of grounds to enquire into the affairs and

adjudicateuponallegedviolationsinrelationtotheOffer;

d) Documentarybasisforallegation inparagraph3oftheSCNsthattheBRLMs/Noticees

went by the Companys understanding in relation to the applicability of minimum

capitalization norms, without exercising necessary due diligence and satisfying

themselvesthatfullandcompletedisclosureshavebeenmade;

e)

Documentary

basis

for

allegation

in

paragraph

3

of

the

SCNs

stating

that

the

BRLMs/

Noticees failed toensure inclusionof fullandcompletedisclosure in theRHPsoasto

enableapplicantstotakeaninformedinvestmentdecision;

f) Documentson thebasisofwhichSEBIhasalleged inparagraph3of theSCNs stating

thattheBRLMs/NoticeessuppressedmaterialfactsintheRHP;

g)

Documentarybasisforallegation inparagraph3oftheSCNsthattheBRLMs/Noticees

attempted tomislead investors intobelieving that RBI hadunconditionallyexempted

eligible nonresident transferees from the requirement of obtaining NoC from their

respectiveregulators;

h) Documentary basis for the allegation in paragraph 4 of the SCNs that the non

disclosuresofmaterial information in theRHPmakes theBRLMs/Noticeesjointlyand

severally liable for failing toexerciseproperduediligenceon theirpart inviolationof

theprovisionsoftheICDRRegulationsandMerchantBankersRegulations;



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i) AllcorrespondencebetweenSEBIandtheRBIandanyinformationandlettersreceived

fromRBIinrelationtothepresentmatter;

j)

AllcorrespondencebetweentheBRLMs/NoticeesandSEBI,whichmayhavebeenrelied

uponbySEBI;

k)

Allcorrespondence

between

the

Company

and

RBI

in

relation

to

the

Offer,

which

may

havebeenrelieduponbySEBI;

l)

AllcorrespondencebetweenSEBIandtheCompanyinrelationtotheOffer,whichmay

havebeenrelieduponbySEBI;

m)

Anyadditional information,documentsorcorrespondencewhichSEBIhas reliedupon

whileissuingtheSCN.

10.OnDecember19,2013followingdocumentsalongwiththecopiesweremadeavailablefor

inspectionandwereinspectedbytheBRLMs/NoticeesandtheirALRs:

a)

Originalorder communicatingappointmentof theAdjudicatingOfficerdatedOctober

04,2013;

b) OriginalcopiesofPageno.228ofRHPofCAREandPageNo.228and229ofProspectus

ofCARE;

c) Original copy of letter dated December 28, 2012 received from BRLMs interalia

containing copy of RBI letter dated September 26, 2012 at Annexure H, letter dated

October

05,

2012

submitted

by

CARE

to

RBI

at

Annexure

I

and

RBI

letter

dated

December06,2012atAnnexureL;

d) OriginalcopyofletterdatedSeptember30,2011referringtoAnnexureIII;

e) OriginalcopyletterdatedDecember21,2012submittedbyBRLMs;

f) With respect to documents requested under Point 1 of Annexure 1 of letter dated

November15,2013,thesamewasnotprovidedstatingconfidential.

11.Videtheir individuallettersdatedDecember6,2013,theBRLMs/Noticeessubmittedtheir

intentionto

apply

for

settlement

through

consent

mechanism

and

inter

alia

sought

for

four

weeks time from the receiptof the letter to file the same.Subsequent to the same,vide

individual letters dated January 03, 2014, the BRLMs/ Noticees inter alia requested for

further threeweeks time i.e.upto January24,2014 toconclude their internaldiscussions

and convey their decision to avail of the consent route for settlement in the matter.



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However,itisobservedthattheBRLMs/Noticeesdidnotfileanyapplicationforsettlement

throughconsentmechanism.

12.Vide individualhearingnoticedatedDecember30,2013,theBRLMs/Noticeesweregiven

anopportunity

for

personal

hearing

on

January

09,

2014.

In

response

vide

letter

dated

January02,2014,theALRsoftheBRLMs/NoticeessoughttimetillJanuary16,2014tofilea

jointwrittenresponsetotheSCNissuedtothemandfurtherrequestedtofixthedateofthe

personalhearingpostthesubmissionofwrittenresponse.Thesaidrequestwasaccededto.

VideemaildatedJanuary03,2014,theBRLMs/NoticeesweregiventimeuptoJanuary16,

2014toreplytotheSCNandanopportunitytoappearforpersonalhearingonJanuary21,

2014. SubsequentlyonJanuary16,2014,ALRssubmittedreplytotheSCNonbehalfofthe

BRLMs/Noticees.Thesubmissions interaliamadevidethesaid letterhavebeendiscussed

inthelaterpartofthisOrder.

13.PersonalhearinginthematterwasheldonJanuary21,2014whereinMs.IpsitaDutta,Ms.

GazalRawal,Ms.GarimaJoshifromAmarchand&Mangaldas&SureshA.Shroff&Co.,the

ALRs of the BRLMs/ Noticees, Shri Ajay Vaidya from Kotak Mahindra Capital Company

Limited, Shri Nishith Mehta from DSP Merrill Lynch Limited, Shri B Renganathan from

Edelweiss Financial Services Limited, Shri Subir Saha from ICICI Securities Limited, Ms.

Monica

Nagpal

from

IDBI

Capital

Market

Services

Limited,

Shri

Bhaskar

Chakraborty

from

SBI Capital Markets Limited, (hereinafter collectively referred to as Authorised

Representatives(ARs))appearedonbehalfoftheBRLMs/Noticees. TheARsreiteratedin

detail the submissions made vide letter dated January 16, 2014. During the hearing,ARs

submittedfollowingdocuments:

a.

Copy of Foreign Exchange Management (Transfer of Issue of Security by a person

ResidentOutsideIndia)Regulations,2000(FEMARegulations);

b. Copyof theconsolidatedFDIPolicy issuedby theDepartmentof IndustrialPolicyand

Promotiondated

April

10,

2012;

c. CopyofMasterCircularonForeignInvestmentinIndia;

d. Copiesoffollowingcaselaws:

o ImperialCorporateFinance&Service(P.)Ltd.VsSEBI;

o AdjudicationOrderagainstSBICapitalMarketsLimiteddatedApril17,2009;

o BurrenEnergyIndiaLtd.&Anr.VsSEBI;



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o TATACumminsLtdVsStateofJharkhand&Others;

o Extractsof redlineversionof theRHPwhichwasenclosedaspartof letterdated

November05,2012filedwithSEBI inresponsetofinalobservations issuedbySEBI

inrespectoftheoffer.

Duringthe

hearing

ARs

were

inter

alia

advised

to

submit

past

non

compliance,

if

any,

of

SEBI

ActandRegulationsmadethereunder,byanyoftheBRLMs/Noticees,and,actiontakenby

SEBI inthepast, ifany,againstanyoftheBRLMs/Noticeesduringthe lastfiveyears.ALRs

undertooktosubmitfurthersubmissionsbyJanuary31,2014.

14.Vide letterdated January31,2014,ALRs submitted a summaryof the submissionsmade

during thehearing. The summaryof submissions interaliamade vide the said letterhas

beendiscussedinthelaterpartofthisOrder.

15.

Thereafter, vide supplementary SCN No. EAD6/AK/VS/8924/2013, EAD

6/AK/VS/8927/2014, EAD6/AK/VS/8934/2014, EAD6/AK/VS/8939/2014, EAD

6/AK/VS/8944/2014 and EAD6/AK/VS/8967/2014 dated March 24, 2014, the BRLMs/

NoticeeswereclarifiedthattheBRLMs/NoticeeshaveviolatedRegulation13ofMerchant

Bankers Regulations read with the following clauses of Code of Conduct for Merchant

BankersasspecifiedinScheduleIII:

a.

Clause

1

A

merchant

banker

shall

make

all

efforts

to

protect

the

interests

of

investors;

b. Clause4 Amerchantbanker shallatall timesexerciseduediligence,ensureproper

careandexerciseindependentprofessionaljudgment;

c. Clause6 Amerchantbankershallensure thatadequatedisclosuresaremade to the

investors in a timely manner in accordance with the applicable regulations and

guidelinessoastoenablethemtomakeabalancedandinformeddecision;

d. Clause7 Amerchantbankershallendeavourtoensurethattheinvestorsareprovided

with true and adequate information without making any misleading or exaggerated

claimsor

any

misrepresentation

and

are

made

aware

of

the

attendant

risks

before

takinganyinvestmentdecision;

e. Clause 20 A merchant banker shall not make untrue statement or suppress any

materialfactinanydocuments,reportsorinformationfurnishedtotheBoard.



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NoticeeswerealsoadvisedtoinformthepresentstatusofcomplianceofRBIsletterdated

December 10, 2012 regarding compliance with minimum capitalization norms of US$0.5

millionapplicable tononfundbasedNBFCsby thecompany/CARE.TheBRLMs/Noticees

wereadvised tooffer commentson theaforesaidwithin15days from the receiptof the

Notice.

16.

VideemaildatedApril07,2014,ALRssoughtgrantofadditionaltimeoftwoweeksi.eupto

April21,2014tosubmittheresponse.Byreturnemailonthesamedatei.e.April07,2014,

it was communicated to the ALRs that the request for additional time to submit the

responsehasbeenaccededto.VideletterdatedApril21,2014,theALRssubmittedspecific

responsestothepointsmentionedinthesupplementarySCNdatedMarch24,2014which

isdiscussedinthelaterpartofthisOrder.

17.

Thesaid replydatedApril21,2014 interalia indicated thatRBIhadextended thedateof

compliancewiththeminimumcapitalizationrequirementbythecompany/CAREfromJune

09,2013 toSeptember30,2013. Thesaid reply furtheralso informed that thecorporate

announcementsmadebythecompany/CAREthroughthewebsitesoftheNSEandBSEon

September27,2013,indicatethattheBoardofDirectorsinthemeetingheldonSeptember

27,2013hadgiventheconsentfortheissueandallotmentof4,46,310equitysharesofRs.

10/

each

to

Ascent

India

Fund

III

managed

by

Ascent

Capital

Advisors

India

Private

Limited

atapriceofRs.560.15perequityshareaggregatingtoanissuesizeofRs.25,00,00,547to

complywiththeminimumcapitalisationnorms.

18. Inthe interestofnaturaljustice,theBRLMs/Noticeesweregivenanotheropportunity for

personal hearing on April 30, 2014 vide hearing notice dated April 22, 2014. Vide email

datedApril28,2014,theALRsrequestedforashortextensiontoMay07orMay08,2014or

asuitabledatethereafter.Videreturnemailofthesamedatei.e.April28,2014,itwasinter

aliacommunicated

to

the

ALRs

that

their

request

for

short

extension

has

been

acceded

to

andthatthefreshdateandtimewillbeintimatedsubsequently.

19.Under thepowersconferredupon theAdjudicatingOfficerunderSubsection2ofSection

15IofSEBIAct,informationwassoughtfromRBIwithrespecttotheongoingadjudication

proceedings against the BRLMs/ Noticees vide letter dated April 30, 2014, to which RBI



10/86


repliedvideletterdatedMay21,2014.TheaforesaidletterdatedApril30,2014toRBIand

RBIsresponsedatedMay21,2014wereprovidedtotheBRLMs/Noticeesforseekingtheir

commentsvideletterdatedMay27,2014.TheBRLMs/Noticeeswereadvisedtogivetheir

comments,ifany,byJune11,2014.VideletterdatedJune10,2014,theALRsacknowledged

thereceipt

of

the

letter

dated

May

27,

2014

and

sought

additional

time

of

four

weeks

i.e.

upto July 09, 2014 to submit thejoint response on behalf of the BRLMs/ Noticees. Vide

emaildated June11,2014, itwascommunicated to theALRs thatextensionof timeupto

June30,2014tofiletheresponsehasbeengranted.

20.Vide letter dated June 18, 2014, ALRs inter alia raised queries in consideration of the

principles of natural justice in the matter and sought for the inspection of the

communication between Adjudicating Officer and RBI and clarification on the specific

inferences,if

any,

drawn

by

the

Adjudicating

Officer

in

relation

to

the

purported

RBI

communicationandtheextentandthemannerinwhichitwouldaltertheconclusionsand

allegations set out in the Notices. In the said letter, ALRs inter alia also referred to the

inspectionheldonDecember19,2013andstatedthattheRBIcommunicationwasneithera

partoftheNoticenorwasitprovidedtotheNoticeesduringthesaidinspection.

21.Vide letterdatedJune19,2014, itwasclarifiedtotheALRsthatthesaidRBI'sresponseto

letterdatedMay21,2014came intoexistenceafterthe inspectionconductedbythemon

December19,

2013,

as

such,

same

could

not

form

part

of

documents/

information/

evidencerelieduponbySEBIduringinspectiononDecember19,2013.OnJune23,2014,in

the interest of naturaljustice, ALRs were given opportunity to inspect: (i) copy of letter

datedApril30,2014issuedbytheAdjudicatingofficertoRBIalongwithannexuresA,Band

C thereto,with thenameof theaddresseeandconcerneddepartmentofRBI towhich it

wasmarkedredacted;and(ii)RBI'sletterdatedMay21,2014inoriginalwiththenameand

designation of the RBI Officer who had responded and reference number of the letter

redacted.Thereaftervideemaildated June26,2014,ALRs soughtadditional timeof two

weeks from June 30, 2014 to submit their response. Vide letter Ref: EAD

6/AK/VS/18481/2014datedJune27,2014,itwasinteraliafurtherclarifiedtotheALRsthat

the precedents submitted by them in their reply in respect of M/s. National Building

CorporationLimitedandM/s.DLFLimitedcannotsupporttheBRLMs/Noticeesclaimthat

they proceeded with abundant caution and concluded on the nonapplicability of the

minimum capitalization norms in a reasoned manner, considering the past precedents



11/86


where a similar precedent was made, to conclude the nonapplicability of minimum

capitalizationnorms to investmentmadebyFIIs in the IPOofCARE.Further,theNoticees

videthesaid letterweregiventimetillJuly11,2014formakingfurthersubmission, ifany.

Vide letterdated July03,2014, theALRs recorded the inspectionundertakenon June23,

2014by

the

ALRs

on

behalf

of

the

Noticees.

Vide

letter

dated

July

11,

2014,

ALRs

on

behalf

of the BRLMs/ Noticees submitted their reply to letter dated May 27, 2014 which is

discussedinthelaterpartofthisOrder.

22.

ItwasobservedfromaperusalofthereplydatedJuly11,2014filedbytheALRsonbehalfof

the BRLMs/ Noticees that the ALRs while replying had inter alia categorised RBIs reply

datedMay21,2014intoView1,2and3asfollows:

(a) View1:acquisitionofsharesbyFIIsunderPISincaseofanofferforsalewillbetreated

asFDIandminimumcapitalisationnormswillapplytosuchinvestmentsinceacquisition

isnotmadeintermsofRBICircularA.P.(DIRSeries)CircularNo.53datedDecember17,

2003 at the ruling market price and the entire process does not take place on the

normalwindowofthestockexchangewheresecondarymarkettransactionstakeplace;

(b) View2:thePastPrecedentsare inthenatureof letterswhichare issuedonacaseto

casebasisandcannotbemadeapplicableuniformly.Onlythosecommunicationsissued

by way of A. P. (DIR Series) Circulars or Notifications or Press Releases under the

provisionsof theForeignExchangeManagementAct,1999 (hereinafter referred toas

FEMA)whichareinthepublicdomaincanbemadeapplicableacrosstheboard;and

(c) View 3: that pursuant to communication between the Company and the RBI with

respecttocompliancewithminimumcapitalisationnorms,RBIby its letterdatedApril

21,2014totheCompanyhasadvisedthatcertainreportingbemodifiedtocomplywith

therelevantguidelinestoenabletheinvestmenttoqualifyasFDI.

23.VidehearingNoticedated July21,2014,pursuant to receiptof replydated July11,2014,

another opportunity of personal hearing on August 5, 2014 was granted to the BRLMs/

Noticees.Ms.IpsitaDutta,Ms.GazalRawal,Ms.GarimaJoshifromAmarchand&Mangaldas

&SureshA.Shroff&Co.,theALRsonbehalfoftheBRLMs/Noticees,ShriAjayVaidyaand

ShriVishalBandekar fromKotakMahindraCapitalCompanyLimited,ShriAbhiAbhimanyu



12/86


from DSP Merrill Lynch Limited, Shri B Renganathan from Edelweiss Financial Services

Limited,ShriSubirSahafromICICISecuritiesLimited,ShriSubodhMallyafrom IDBICapital

Market Services Limited, Shri Bhaskar Chakraborty from SBI Capital Markets Limited,

AuthorisedRepresentatives(ARs)appearedonbehalfoftheBRLMs/Noticees.

24.Duringthehearing,thefollowingwasclarifiedbasedonthecategorizationofRBIsresponse

datedMay21,2014intoview1,2and3,asabove,madebytheALRs:

(a) View1: Itwasclarifiedthatprima facie it ispartoftheallegations intheShowCause

NoticedatedOctober07,2013;

(b) View2:ItwasclarifiedthattheprecedentsreferredbytheBLRMscannotsupporttheir

claim

that

they

proceeded

with

abundant

caution

and

concluded

on

the

non

applicabilityoftheminimumcapitalizationnormsinareasonedmanner, byconsidering

the past precedents where a similar distinction was made, to conclude the non

applicabilityoftheminimumcapitalizationnormstoinvestmentsmadebyFIIsintheIPO

ofCARE;

(c) View3: Itwasnoted thatRBI vide letterdated July09,2014had advisedCARE that

CAREs Offer for Sale was in compliance with the minimum capitalization norms as

applicableto

non

fund

based

NBFCs.

25.Further,duringthehearingARsreiteratedindetailthesubmissionsmadevideletterdated

July 11, 2014 read with submissions made on April 21, 2014 and January 16, 2014 and

furthersubmittedcopiesofthefollowingPressReleasesissuedbyRBI datedFebruary05,

2010 in the matter of M/s. Sobha Developers Limited, dated December 20, 2011 in the

matterofM/seClerxServicesLimitedandM/sPolarisFinancialTechnologyLimited,dated

May 24, 2012 in the matter of M/s. Housing Development Finance Corporation Limited.,

datedSeptember

26,

2012

in

the

matter

of

M/s.

Voltamp

Transformers

Limited,

dated

March19,2013 inthematterofM/s.IndiabullsHousingFinanceLimited,datedMarch07,

2014 in thematterofM/s.Manappuram Finance Limitedanddated July03,2014 in the

matterofM/s.BhartiAirtelLimited.



13/86


26.Further, certain queries raised at the hearing by the Adjudicating Officer and the

summarisedresponseoftheARstothesaidquerieshavebeenbroughtoutbelow:

(a) Query: Itwaspointedoutthat fromthedocumentsavailableonrecord,theredidnot

appearany

documental

proof

provided

to

RBI

indicating

the

date

of

opening

of

the

Offer. The ARs were advised to provide documentary evidence available, if any,

intimatingRBIaboutthedateofopeningoftheOffer.

ResponseoftheARs:

As theBRLMshadalready restricted the issueonly tononresident investing through

thePISrouteassetoutunderFEMARegulations,theywereofthebonafidebeliefthat

theminimum capitalization normswere inapplicable to the current issuer and there

wasno

further

requirement

to

engage

with

the

RBI

or

seek

any

approvals.

It

is

also

not

marketpractice towrite to theRBIoranyother regulator (other thanSEBI)notifying

them of the date of the issue opening. In any event, information about the issue

openingdatewasalreadyavailable/announcedinthepublicdomain.

(b) Query: Itwaspointedout that letterdatedDecember21,2012claimed thatwith the

submissionof letterdatedOctober05,2012,thematterwiththeregulatorwasclosed

in view of the claimed recognized legal position. However, from CAREs letter dated

December 10, 2012 to RBI, it was observed that after the opening of the Offer,

discussions were held with RBI after which it was understood that minimum

capitalization norms must be satisfied in relation to the Offer and accordingly an

addendumwas issuedonDecember11,2012.Clarificationwassoughtastowhysuch

measures such as formal discussions to understand RBIs interpretation on the

applicabilityofminimumcapitalizationnorms to theOffer,or,a letterseekingspecific

clarificationfromRBIcouldnotbeadoptedbeforetheopeningoftheoffer,especiallyin

view

of

the

fact

that

RBI

had

vide

letter

dated

September

26,

2012

communicated

that

minimumcapitalizationnormsapplicabletoNBFCsshouldbestrictlyadheredto.

ResponseoftheARs:

TheALRsreiteratedthesubmissionsmadebythematpara72oftheJanuary16,2014

submission.TheARsalso reiterated thefact thata strictadherence to theminimum



14/86


capitalization normswould arise only if the issue was open to FDI investors under

Schedule1ofFEMA20.

TheARsfurther submitted that since FEMARegulationsandAPDIR SeriesCirculars/

MasterCirculars

issued

by

RBI

from

time

to

time

were

clear

(as

regards

non

applicability of the conditions applicable to FDI including minimum capitalization

norms)totheoffermadetoEligibleFIIsunderSchedule2ofFEMARegulations,Eligible

NRIsunderSchedule4ofFEMARegulationsandEligibleQFIsundertheSchedule8of

theFEMARegulations,theOctober05,2012letterwasfiledasamatterofrecordand

good order only to clarify the aforesaid nonapplicability, instead of seeking any

approvalsfromRBI.Hence, nofollowupwas requiredwithRBI subsequent to letter

datedOctober 05, 2012. In this regard, theARs reiterated the detailed submissions

madeontheapplicableregulatoryframeworkassetoutunderpara2028ofJanuary

16, 2014 submissions, para 3040 of the submission datedJanuary 31, 2014, reply

datedJuly11,2014andAnnexure14enclosinglegalopinionfromFormerChiefJustice

of the High Courts of Kerala and Karnataka and a Former Presiding Officer of the

SecuritiesAppellateTribunal.,ShriN.K.Sodhi.

ItwasfurthersubmittedthattheRBIletterdatedSeptember26,2012didnotmakeany

specific

mention

to

FIIs,

NRIs

or

QFIs.

The

specific

applicability

of

minimum

capitalizationnormstoFIIsandQFIwasmentionedforthefirsttimeinRBIletterdated

December06,2012.DiscussionswereheldwithRBIonlysubsequenttoreceiptofthis

letter,whichnecessitatedsuchdiscussions.Adetailed letterdatedDecember07,2012

was also filed with RBI clarifying that minimum capitalization norms were not

applicable.TheunderstandingoftheBRLMsthattheminimumcapitalizationissuewas

closedwiththeRBIafterfilingofletterdatedOctober5,2012wasfurthercorroborated

by thefact thatpostfiling of this letter, the company received a RBI letter dated

October18,

2012

granting

an

NOC

for

sale

of

share

by

the

selling

shareholders,

who

werebanks.CompanyalsoreceivedletterdatedOctober25,2012fromRBIstatingthat

sellingshareholderswhowereNBFCswerenotrequiredtoobtainNOC.

(c) Query: Clarification was sought in the matter as to if RBIs view vide letter dated

December06,2012wasfoundtobenot inconsonancewithFEMARegulationsandAP



15/86


DIRSeriesCirculars/MasterCirculars issuedbyRBI from time to time, inwhich case,

whythematterwasnottakenupwithRBIforrevieworbeforetheappropriateforum,

after issuing of the addendum on December 11, 2012, especially when adjudication

proceedingswereinitiatedbySEBIontheissue.

ResponseoftheARs:

TheARssubmittedthatuponreceiptoftheRBIs letterdatedDecember06,2012,the

companyinconsultationwiththeBRLMs/Noticeesfiledadetailed letteronDecember

07, 2012, explaining why the minimum capitalization norms as applicable to FDI

investors investingunderschedule1ofFEMA20was inapplicable inthepresentcase.

However,giventhattheRBIdidnotchangeitsstandandtheissuehadalreadyopened,

having regard to theofferand interestof the investors, thecompany in consultation

withthe

BRLMs/

Noticees

agreed

to

comply

with

the

RBIs

instructions.

Further,

as

a

matterofpractice, it iscustomaryfor the issuer toengagewith theRBI (aswasalso

doneinotheroffersincludingNBCCL/DLFetc)andthemerchantbankersappointedas

theBRLMsdoesnotleadthediscussionswiththeregulatorsinmattersofgovernment/

regulatoryapprovals.Theunderlyingapproachisalsolinkedtothefactthatunderlaw,

the obligation to apply and seek government approval is on the issuer and not the

MerchantBankers.

Itwasfurther submitted that In thepresent case, since theRBIhadalready takena

stand regarding applicability ofminimum capitalization norms to the offer after the

openingoftheissue,theBRLMs/Noticeesfelt itwasappropriateto immediatelyissue

theaddendumwhichwasissuedbywayofapublicadvertisementpriortotheclosure

oftheOffertokeepthe investors informedandtheprospectuswasdulyupdatedwith

alltherelevantRBIrelatedcorrespondence.

Further,

ARs

submitted

that

in

terms

of

the

extant

framework

within

which

RBI

operates,thereisnorecognizedmechanismthatiscurrentlyavailabletoappealfroma

directiongivenbytheRBI(suchasonerendered inthepresentcase)orseekareview.

Also,bythetimetheAOproceedingswere initiated,almostayearaftertheclosureof

the offer, the company had already received the FDI investmentfor complyingwith



16/86


minimumcapitalizationnormsintermsofRBImandate.Assuch,therewasnobasisto

engagewiththeRBIastotheapplicabilityofthesenormstotheissuercompany.

27.TheARsfurthersoughtanadditionalweekstimetofileadetailedrecordofthehearingand

detailedresponses

to

the

aforesaid

queries

and

stated

that

the

same

should

be

read

in

conjunctionwiththeearliersubmissionsandthesesummaryresponses.Thisadditionaltime

tofiletherecordofhearingandwrittenresponsestothequerieswasgranted.Vide letter

datedAugust14,2014,ALRssubmittedtherecordofthesecondhearingwhichisdiscussed

inthe laterpartoftheOrder.Detailsoftheanchor investorswhoapplied intheOfferand

wereallocatedsharesandthepriceatwhichtheshareswereallocated,asalsodetailsofFIIs

andQFIswhoapplied in theOfferandwereallocatedshares,togetherwiththedetailsof

thedailysubscriptionreceived fromallcategoriesof investorswere interaliasoughtvide

emaildatedSeptember12,2014.Further,thedetailsofallocationmadecategorywisevisa

vis the subscription receivedwas soughtvideemaildatedSeptember30,2014. The said

details were received from the ALRs on behalf of the BRLMs/ Noticees vide their letters

datedSeptember24,2014,October07,2014andOctober13,2014.

28. It was further noted that it was submitted by the ALRs that based on the review of

applicable regulatory framework at the time and the legal advice sought, the BRLMs/

Noticees

firmly

and

independently

believed

that

if

the

Offer

was

limited

to

eligible

FIIs

(investing under Schedule 2 of the FEMA Regulations), eligible NRIs (applying on a non

repatriationbasisinaccordancewithSchedule4oftheFEMARegulations)andeligibleQFIs,

the condition in respect of the minimum capitalisation norms would not apply to the

Company. However, no such legal advice received by the BRLMs/ Noticees had been

submittedbeforetheAdjudicatingOfficer.Hence,videemaildatedSeptember30,2014,the

BRLMs/Noticeeswererequestedtoproducesuch legaladvicereceived, ifany,byOctober

01,2014.

29. InresponsevideletterdatedOctober01,2014,theALRsonbehalfoftheBRLMs/Noticees

have interalia submitted that theBRLMs/Noticeesengaged indiscussionswith the legal

advisors on the Offer i.e. Luthra & Luthra Law Offices (domestic legal counsel to the

Noticees)andAmarchand&Mangaldas&SureshA.Shroff&Co.(domesticlegalcounselto

thecompany).Itwasfurtherstatedthattheviewprovidedbythelegalcounselswasinline



17/86


withthecollectiveunderstandingformedbytheBRLMs/Noticeesonthematter.Tosupport

the fact that thediscussions in relation to theapplicabilityof theminimum capitalization

normdidtakeplacebeforethefilingofletterdatedOctober05,2012withRBI,theBRLMs/

Noticees requested the legalCounsels toprovideaconfirmation in this regard from their

end.Accordingly,

Luthra

&

Luthra

Law

Offices

vide

their

letter

dated

October

01,

2014

addressed to the BRLMs/ Noticees inter alia confirmed that post receipt of letter dated

September26,2012fromRBI,theywereinvolvedinvariousdiscussionswiththecompany,

theBRLMsaswellas the IndianLegalCounsel to thecompanyon theapplicabilityof the

provisionsofandvariousinvestmentroutesundertheFEMARegulations,MasterCircularon

Foreign Investments in Indiadated July02,2012 issuedbyRBI and theConsolidated FDI

PolicydatedApril10,2012 issuedby theDepartmentof IndustrialPolicy andPromotion,

MinistryofCommerceand Industry,Governmentof India. Itwas interalia furtheradded

thereinthatthecompanyhadfiledletterdatedOctober05,2012withRBI,inlinewiththese

discussions,andthatrelevantchangeswerealsomadetotheOfferdocument.Similarletter

datedOctober01,2014wasalso issuedbyAmarchand&Mangaldas&SureshA.Shroff&

Co.totheBRLMs/Noticeesinthematter.Theseletters,inturn,wereforwardedbytheALRs

alongwiththeiraforesaidreplydatedOctober01,2014.

CONSIDERATIONOFISSUESANDFINDINGS

30.

IhavecarefullyperusedthewrittensubmissionswhereversubmittedbytheNoticees,the

factsput forthduring thehearingsand thedocumentsavailableon record.Theallegation

against theBRLMs/Noticees is that thenondisclosureof thematerial information in the

RHPmakesBRLMsjointlyandseverely liableforfailingtoexerciseproperduediligenceon

theirpart,whichisinviolationofClause1ofFormCofScheduleVIofRegulation8(2)(b)of

ICDR Regulations, Regulation 57(1), Regulation 57(2)(a)(ii), Regulation 64(1) of ICDR

RegulationsandRegulation13ofMerchantBankersRegulationswhichreadasfollows:



18/86


Regulation8(2)(b),57(1),57(2)(a)(ii)and64(1)oftheICDRRegulations

Documentstobesubmittedbeforeopeningoftheissue

8 (2) The leadmerchant banker shall submit thefollowing documents to theBoardafter

issuance of observations by the Board or after expiry of the period stipulated in sub

regulation(2)

of

regulation

6if

the

Board

has

not

issued

observation:

(b) aduediligencecertificateasperFormCofScheduleVI,at the timeofregistering the

prospectuswiththeRegistraroftheCompanies.

Mannerofdisclosuresintheofferdocument

57(1)Theofferdocumentshallcontainallmaterialdisclosureswhicharetrueandadequate

soastoenabletheapplicantstotakeaninformedinvestmentdecision.

(2)Withoutprejudicetothegeneralityofsubregulation(1):

(a)theredherringprospectus,shelfprospectusandprospectusshallcontain:

(ii)thedisclosuresspecifiedinPartAofScheduleVIII,subjecttotheprovisionsofPartsBand

Cthereof.

Duediligence.

64 (1) the leadmerchantbankersshallexerciseduediligenceandsatisfyhimselfaboutall

the aspects of the issue including the veracity and adequacy of disclosure in the offer

documents.

Regulation13oftheMerchantBankersRegulations

Code

of

conduct.

13EverymerchantbankershallabidebytheCodeofConductasspecifiedinScheduleIII.

Readwiththefollowingclauses:

Clause1Amerchantbankershallmakealleffortstoprotecttheinterestsofinvestors.

Clause4 Amerchantbanker shallatall timesexerciseduediligence,ensurepropercare

andexerciseindependentprofessionaljudgment.

Clause 6 A merchant banker shall ensure that adequate disclosures are made to the

investorsinatimelymannerinaccordancewiththeapplicableregulationsandguidelinesso

asto

enable

them

to

make

abalanced

and

informed

decision.

Clause7 Amerchantbankershallendeavourtoensurethattheinvestorsareprovidedwith

trueandadequateinformationwithoutmakinganymisleadingorexaggeratedclaimsorany

misrepresentationandaremadeawareoftheattendantrisksbeforetakinganyinvestment

decision.



19/86


Clause20 Amerchantbankershallnotmakeuntrue statementorsuppressanymaterial

factinanydocuments,reportsorinformationfurnishedtotheBoard.

31.TheALRsonbehalfoftheBRLMS/Noticeeshaveinteraliasubmittedasfollows:

Thatpost

deliberations

among

the

BRLMs/

Noticees

themselves

as

well

as

with

the

Companyandbasedon careful considerationof theapplicable regulatoryframework,

theBRLMs/Noticeeswereoftheview thattheapproachbeingtaken intheOfferwas

correctandreasonableanddidnotanticipateanyfurtherregulatoryconcern inrespect

oftheOffer;

Thatfrom theplainreadingoftheFEMARegulations, itwasclearthat incaseofnon

bankingfinancial companies, theminimum capitalisationnormsapplywith respect to

investmentbywayofFDIRouteonly;

That PIS Route set out under Regulation 5(2) read with Schedule 2 of the FEMA

Regulations,permitsFIIstosubscribetosharesofan Indiancompany in publicoffers.

Since public offers include offerfor sale by existing shareholders of a company, FII

participationinsuchpublicoffersisunderthePISRoute;

That in terms of Schedule 2 of the FEMARegulations as introduced onMay 3, 2000,

under paragraphs 1(2) and 1(5), FIIs were permitted to purchase shares through

registeredstockbrokersandalsothroughprivateplacement.However,paragraph1(5)

which

provides

for

private

placements

was

substituted

via

an

amendment

dated

June

18,

2003(JuneAmendment),withthecurrentparagraph1(5)bringingpublicofferswithin

thescopeofSchedule2;

Thatsubsequently,inacirculardatedDecember3,2003(A.P.(DIRSeries)CircularNo.38)

(CircularNo.38),RBIelaboratedontheJuneAmendmentstating interaliathataFII

may invest in a particular issue of an Indian company either under Schedule 1 or

Schedule2. Itcannot,however,availofboththeroutessimultaneouslyforaparticular

issue;

Thatsubsequently,

in

terms

of

Circular

No.

53,

RBI

permitted,

SEBI

registered

FIIs/

sub

accountsofFIIstobuy/sellequityshares/debenturesofIndiancompanies...throughstock

exchanges in India at the ruling market price,... and also to buy/sell shares and

debenturesetc.oflisted/unlistedcompaniesotherwisethanonstockexchangeataprice

approved by SEBI/ Reserve Bank as per terms and conditions prescribed in the

Annexure. (emphasissupplied). In relation topricing, theAnnexure toCircularNo.53



20/86


statedthatinthecaseofpublicoffer,thepriceofsharestobeissuedshouldnotbeless

thanthepriceatwhichsharesareissuedtoresidents;

That at View 1 of the RBI Communication, while citing Circular No. 53, it has been

mentionedthatwhereanacquisitionofsharesisnotmadeattherulingmarketpriceon

thefloor

of

the

stock

exchange,

it

will

not

be

treated

as

investment

under

the

PIS

Route;

That theRBICommunication selectivelymentionsonly thepart in theCircularNo.53

whichgrantsgeneralpermissiontoFIIsforundertakingtradesonthefloorofthestock

exchange,andneithermentions,norexplainsthewording inrelationtobuying/selling

sharesotherthanonastockexchange,i.e.,andalsotobuy/sellsharesanddebentures

etc.of listed/unlistedcompaniesotherwisethanonstockexchangeatapriceapproved

bySEBI/ReserveBankaspertermsandconditionsprescribedintheAnnexure;

That, aplain reading of Circular No. 53 makes is abundantly clear that the extant

regulatoryframeworkalsocontemplatesacquisitionsotherwisethanonstockexchange

atapriceapprovedbySEBI/RBIasperthetermsandconditionsprescribedtherein;

Further, that at View 1 of RBI Communication, it is clearly mentioned that such

acquisitionistreatedasinvestmentundertheFDIpolicyandalltheFDIconditionalities,

includingminimum capitalization norms, aremade applicablefor the same.Aplain

readingofthesamesuggeststhatminimumcapitalizationnormsareapplicableonlyto

FDItransactions.Giventhat investmentsundertheFDIRoutewerenotpermittedtobe

made

in

the

Offer,

there

was

no

reason

for

the

FDI

conditions,

including

that

in

relation

tominimumcapitalisationnorms,toapply;

That specifically, conditions with respect tominimum capitalisation do notfind any

mentioninRegulation5(2)andSchedule2oftheFEMARegulationswhichsetsoutlimits

andconditionsapplicableto investmentsbyFIIsunderthePISRoute.Schedule4ofthe

FEMARegulationsdealingwithinvestmentsbyNRIsonanonrepatriationbasisdoesnot

imposeanyminimumcapitalisation requirements. In termsofSchedule8of theFEMA

Regulations,QFIshavealsobeenaccordedageneralpermissiontoinvestinpublicoffers

withoutany

stipulation

of

ensuring

compliance

with

minimum

capitalisation

norms

applicabletoFDI;

Further,thatfromtheplainreadingoftheschematicrepresentationassetoutunderthe

MasterCircularreadwiththeFEMARegulations, it isclearthatFIIs,NRIsandQFIsfall

underthePISRoute;



21/86


Thatany interpretationofCircularNo.53cannotoverride theprovisionsof theFEMA

Regulations which make it abundantly clear that participation in public offers is

permittedforFIIsunder thePISRoute.Thus, theapplicabilityofFDIconditionalities to

FIIs investingunderthePISRoute intheOffer (assetout intheRBICommunication) is

not,explicitly

or

implicitly,

supported

by

any

legislation,

regulation,

notification,

circular

orpress release inthepublicdomain.Aplain readingof theapplicable laws, including

theFEMARegulationsaswellasCircularNo.53,doesnotwarrantsuchaninterpretation

either;

That theNoticeeshave sincealsoobtainedan independent legalopinionfromFormer

ChiefJusticeoftheHighCourtsofKeralaandKarnatakaandaFormerPresidingOfficer

of the SecuritiesAppellate TribunalMr. N.K. Sodhi (hereinafter referred to as Legal

Opinion);

That theNoticeesfirmly believe that the disclosure in respect of theRBI letterdated

September26,2012, inthesection GovernmentandOtherApprovalsof theRHPwas

complete and adequate as the disclosurewasmade in light of the BRLMs/Noticees

understandingthatminimumcapitalisationnormswerenotapplicabletotheCompany

inthepresentcase;

ThatasthekeyapprovalinthisregardwasthegrantofexemptionbytheRBItoobtain

requisiteNoC (since theCompanys letters datedMay 15, 2012 andAugust 31, 2012

specifically

sought

that

approval)

it

was

spelt

out

in

the

Government

and

Other

Approvals section of the RHP in amanner that is consistentwithpastpracticesfor

disclosuresmadeunder this section.TheSeptember Letterwasaccordinglyalsomade

availableforpublic inspection to all investorsparticipating in theOfferwho had the

opportunitytoreviewanyconditionalitiesimposedbytheRBI;

That theBRLMs/Noticeesbasedon the reviewofapplicable regulatoryframeworkat

thetimeand legaladvicesought,firmlyand independentlybelievedthat iftheOffer is

limitedtoFIIs(investingunderSchedule2oftheFEMARegulations),NRIs(applyingona

nonrepatriation

basis

in

accordance

with

Schedule

4of

the

FEMA

Regulations)

and

QFIs

(Schedule 8 of the FEMA Regulations), the condition in respect of the minimum

capitalisationnormswouldnotapplytotheCompany.Accordingly,theNoticeesbelieved

withgood reason that conditionswith respect tominimum capitalizationnormswere

notrelevanttobedisclosedintheRHPasthesewerenotapplicableanddisclosurewith

respecttoexemptiontoeligiblenonresidentinvestorshavingtoobtainaNoCassetout



22/86


intheletterdatedSeptember26,2012ofRBIwasasufficientandrelevantdisclosurefor

investorstotakeaninformedinvestmentdecision;

Furtherthat, inrelationtotheCompanys lettertotheRBIdatedOctober5,2012,the

BRLMs/NoticeeshadnoreasonstobelievethattheOctober05,2012letterwasindeed

relevantto

be

disclosed

in

the

RHP

as

it

was

neither

in

the

nature

of

an

application

for

an

approval,nor, wasitinthenatureofanapprovalitself;

ThattheOctober05,2012letterwaswrittentotheRBIonlyasanacknowledgementof

theSeptember26,2012 lettersincetheNoticeeshadreasonablebasistoconcludethat

ifnoFDIwasbeingpermitted in theOffer, thequestionofcompliancewithminimum

capitalisationnormsdidnotarise.Hence,theCompanyfiledtheletterdatedOctober05,

2012 only as amatter of goodpractice,without seeking anyfurther clarifications or

approvalsfromtheRBIandinviewofthestepsthatwereundertakentoensurethatthe

DraftRedHerringProspectus (hereinafterreferred toas DRHP) wasupdatedto limit

thecategoriesofforeigninvestorsparticipatingintheOffer,theBRLMs/Noticeesfirmly

believed that all issues with respect to the nonapplicability of the minimum

capitalisationnorms to theCompany, in thepresent casewereadequatelyaddressed

andclosedwiththeRBI;

ThattheNoticeeshadnoreasontobelievethatdisclosureoftheconditionssetoutinthe

letterdatedSeptember26,2012wasinadequate/misleadingorthattheinclusionofthe

letter

dated

October

05,

2012

in

the

RHP

prior

to

the

issue

opening

would

have

assisted

theinvestorswhowereparticipatingintheOfferinanymanner;

That theNoticeeshadsatisfied themselvesaboutalltheaspectsoftheOffer including

theveracityandadequacyofthedisclosuresandarenotinviolationofanyprovisionsof

theICDRRegulations,asalleged;

That inaddition toallof theabove,upon receiptof theRBIs letteronDecember10,

2012 to comply with minimum capitalisation norms post the Offer, the Noticees

promptlypreparedanaddendumand submitted the samewithSEBIonDecember10,

2012itself.

This

Addendum

was

published

in

the

newspapers

with

wide

circulation

on

December 11, 2012prior to closure of theOffer in the interest of the investors, and,

updatedandsupplementedtheRHPwithdetailsofallrelevantcorrespondencewiththe

RBI to explain the entire discussion that took place in relation to compliance with

minimum capitalisation norms. Further, the prospectus filed with the Registrar of



23/86


Companies on December 15, 2012 was also duly updated with the details in the

Addendum;

That thefiling of theAddendumwas not an aberration or an anomaly as the ICDR

Regulationsthemselvescontemplateandallowforthepublicationofadvertisements in

theevent

there

are

material

developments

post

filing

of

the

RHP

that

are

required

to

be

disseminated to the investors. It is also noteworthy that theformats of duediligence

certificatesprovided under FormD and E of ScheduleVI of ICDR Regulations require

submissionofsubsequentadvertisementsrelatingtoamendments,ifanymadetoRHP.

Assuch,SEBIalsorecognizesthattheremaybeinstanceswhichmayrequirechangesto

be included toaRHPpostfiling theRHPwith theRegistrarofCompanies (hereinafter

referredtoasROC)bywayofissuanceofadvertisements.AstheAddendumconstitutes

an integralpart of the RHP, theNoticees ensured that true, complete and adequate

disclosures were provided to the investors to enable them to take an informed

investmentdecisionbeforetheclosureoftheOffer;

ThatwhilsttheBRLMs/Noticeeshadexercisedcareanddiligencewhilearrivingattheir

conclusions in relation to thenonapplicabilityofminimumcapitalisationnorms to the

presentmatter,theconditionswereacceptedbytheCompanyintheinterestoftheoffer

processandtheinvestors;

ThattheNoticeesproceededona reasonableandwelldeliberatedunderstanding that

given

the

nature

of

the

Offer

and

the

changes

made

to

restrict

FDI,

the

requirement

to

ensurecompliancewithminimumcapitalisationnormswasinapplicable.Themannerin

whichtheNoticeesarrivedattheirconclusionsisdemonstrativeoftheirbonafideswhile

carryingouttheirfunctionsasmerchantbankers;

Thatfurther inthepresentcase (i)no losswascausedto the investors; (ii)no investor

grievances were received by the Noticees in relation to the Addendumpursuant to

publicationofthesame;(iii)theOfferwasinfactoversubscribedover30times;and(iv)

theprice discovered in the book building issue did notmove adversely in subsequent

tradingin

the

scrip

upon

listing.

No

such

allegations

have

been

made

in

the

Notices

either.

ThatthetermduediligencehasnotbeendefinedintheMerchantBankersRegulations

ortheICDRRegulations.However,itisabundantlyclearthatthelawdoesnotimposean

obligation to meet with, extraordinary or detective standards.When a person is

required to exercise due diligence the only requirement is that usual ordinary and



24/86


reasonableeffortsbeexercisedhavingregardtothefactsandcircumstancesofthecase.

InthecaseofImperialCorporateFinance1,theSecuritiesAppellateTribunal(SAT)has

heldthat,ALeadManagerisrequiredtoemployreasonableskillandcarebutheisnot

requiredtobeginwithsuspicionandtoproceedinamanneroftryingtodetectafraud

orlie

unless

such

information

excites

his

suspicion

or

ought

to

excite

his

suspicion

as

a

professionalmanofreasonablecompetence.2

Thatinthepresentsituationaswell,theBRLMs/Noticeeshadappliedtheirindependent

professional judgement at all times and exercised reasonable skill and care in

determiningwhetherminimumcapitalisationnormswereapplicable in relation to the

Offer.Once anassessmentof the relevantfactorswasmadeby theBRLMsbasedon

their independent evaluationandadvicefrom legal counsel, thenecessarydisclosures

were included in theofferdocuments incompliancewithRegulation64(1)of the ICDR

Regulations;

Thatastherewasnoviolationofanyofthesubstantiveprovisionsoflaw,asapplicable,

noviolationoftheCodeofConductsetout intermsofRegulation13oftheMerchant

BankersRegulationscanbeestablished.IntheSEBIorderdatedApril17,2009issuedin

theadjudicationproceedingsagainstSBICapitalMarketsLimited(inthepublic issueof

SyndicateBankLtd.) ithasbeenstatedthattheviolationofthesubstantive law isnot

established, the allegations of violation of the provisions of the Code of Conduct

prescribed

under

the

Merchant

Bankers

Regulations

is

not

sustainable.;

Thatwhilearrivingat their conclusion in relation tononapplicabilityof theminimum

capitalisationnorms,theBRLMs/Noticeesreliedontheplainreadingoftheapplicable

legalframework,further corroborated by the collective experience of theNoticees as

wellas, specifically, thePastPrecedents,and the legaladvice receivedfrom the legal

counsel;

To substantiate the above submission, the Noticees provided SEBI with the Past

Precedents (M/s. National Building Corporation Limited and M/s. DLF Ltd.), where

approvalswere

granted

by

RBI/

Department

of

Industrial

Policy

and

Promotion

(DIPP),

wherein the regulator/ relevant authority distinguished between investments made

underSchedule1andthosemadeunderSchedule2oftheFEMARegulations.Thatthe

Noticeesconsideredtheapplicablelegalframeworkaswellasthepastregulatorystance

1Imperial Corporate Finance and Services Pvt Ltd v SEBI, SAT Order dated July 7, 20042Id; see also, Samir C. Arora v SEBI, SAT Order dated October 15, 2004



25/86


is indeeddemonstrativeofthefactthattheNoticeesproceededwithabundantcaution

inthepresentmatter;

Thatany lettersfrom regulatoryauthoritiesare indicativeof themanner inwhich the

authorities read and interpret the applicable law. The Past Precedents were not

consideredby

the

Noticees

in

isolation,

but

with

regard

to

their

relevance

to

the

Offer.

In

terms of the Past Precedents, RBI had clarified that the FDI linked conditions for

investment inconstructionanddevelopmentsector likecapitalisationnormswouldnot

beapplicabletoFIIasFII investment inpublicoffers iscoveredunderSchedule2ofthe

FEMARegulationsunderthePISRoute.TheBRLMs/Noticeesconsideredexamplesinthe

construction and development sector since it also has minimum capitalisation

conditionalitiesundertheFDIRoute,as inthecaseofnonbankingfinancialcompanies

andhadreasonablebasistobelievethatthelawwouldbesimilarlyinterpretedinother

cases.ForinvestmentsintheconstructionanddevelopmentsectorthroughPISRoute,no

suchconditionsareapplicable.Inaddition,thePastPrecedentsalsodealtwithoffersfor

sale;

Further, that theNoticees did notmerely rely on the Past Precedents and did infact

consider regulations, notifications, circulars andpress releases in thepublic domain,

none ofwhich state thatminimum capitalisations norms apply to investmentsmade

under the PIS Route. The Noticees, based on their plain reading of the applicable

regulatory

framework,

together

with

the

collective

experience

of

the

Noticees

from

the

Past Precedents, and the legal advice receivedfrom the legal counsel, came to the

conclusionthatminimumcapitalizationnormswereindeednotapplicabletotheOffer;

ThatRBIsviewsvidereplydatedMay21,2014in thisregarddonothavetheeffectof

rendering void the efforts undertaken by the BRLMs/ Noticees in arriving at their

conclusions. The allegations raised in theNotices and the ClarificatoryNotices are in

relationtotheconductoftheBRLMs/Noticees.Assetoutinthisreplyandalsoinearlier

submissionsmadeinthisregard,theBRLMs/ Noticeesproceededwithdeliberationand

onlyafter

evaluating

of

all

relevant

considerations;

ThattheallegationbySEBIthattheRBIsview(i.e.thatitisnotopenforanentitytorely

onregulatoryguidanceprovidedbytheRBIinformalcommunicationstosimilarcasesin

thefuture) impliesthattheBRLMs/Noticeesdidnotproceedwithabundantcaution, is

misplaced.TheRBIsviewshouldnothavetheeffectofcastingaspersionsonthebona

fides of the conduct of the Noticees.Whilst the Past Precedents supplemented the



26/86


Noticeess understanding, theNoticees had a strong basis to conclude thatminimum

capitalisationnormsdidnotapplyinthepresentcase;

ThatinrelationtotheviewssetoutbytheRBI,itwassubmittedthat:

a. View1:TheRBICommunication selectively refersonly toapart inCircularNo.53

andneither

mentions,

nor

explains

the

wordings

in

the

same

Circular

No.

53

which

does infactprovideforbuying/sellingofsharesbyFIIsotherwise thanonastock

exchangeunder thePISRoute,whichwould cover the FII investmentmade in the

Offer.Thus, such investments,beingwithin the scopeofCircularNo.53 (andalso

Schedule2oftheFEMARegulations)clearlyfallwithinthePISRouteandaccordingly

not subject to anyminimum capitalization norms.As substantiated by the Legal

Opinion obtained, a plain reading of the applicable law is consistent with the

conclusionsdrawnbytheBRLMs/Noticees;

b.View2:WhilsttheBRLMs/Noticeesconsideredtheapplicable legalframeworkand

legaladvicewhileconsideringtheapplicabilityoftheminimumcapitalisationnorms,

thePastPrecedentsonlysubstantiatedtheBRLMs/Noticeesconclusionsfurtherand

was, in no way, the sole basis for determining the applicability of minimum

capitalisationnorms.Specially, theconclusiondrawnbySEBIthat theNoticeesdid

notactinareasonablemanner,inlightofView2ismisplacedsincetheNoticeesdid,

infact,relyonareadingoftheFEMA,theFEMARegulations,aswellasthecirculars

issued

by

the

RBI

in

furtherance

of

the

same.

Therefore,

the

Noticees

based

their

conclusiononacombinedconsiderationoftheapplicablelegalframework,whichis

demonstrativeofthebonafidesoftheirconductandthemeasurestakenbythemto

ensurethatadequateduediligencewasexercised;

c. View3:TheRBIsviewsare consistentwith the submissionsmadeby theBRLMs/

Noticees. The BRLMs/Noticees have alsoprovided an update on the Companys

compliancewiththeminimumcapitalisationnorms.

Thataccordingly,theBRLMs/Noticeesconducthasbeeninlinewiththeapplicablelegal

frameworkand

specifically,

not

in

violation

of

either

Clause

1of

Form

Cof

Schedule

VI

read with Regulations 8 (2) (b), Regulation 57 (1), Regulation 57 (2) (a) (ii) and

Regulation64 (1)of the ICDRRegulations,orClauses1,4,6,7and20of theCodeof

ConductandRegulation13oftheMerchantBankersRegulations.



27/86


32. Theissuesthat,therefore,ariseforconsiderationinthepresentcaseare:

A. Whatisthesignificanceofmaterial,trueandadequatedisclosuresasperRegulation57(1),

Regulation57(2)(a)(ii),

Regulation

64(1),

Clause

1of

Form

Cof

Schedule

VI

of

Regulation

8(2)(b)of ICDRRegulationsandRegulation13ofMerchantBankersRegulationsreadwith

clauses1,4,6,7and20ofCodeofConductforMerchantBankersasspecifiedinSchedule

III?

B.

In light of the above, whether RBI letter dated September 26, 2012 and the status of

complianceof the samewasamaterialdisclosure required tobedisclosed in theRHPof

CARE so that the foreign investors/ NonResident investors {i.e. including FIIs, QFIs}

investingintheIPOofCAREcouldtakeaninformedinvestmentdecision?

C. Ifso,whetherthedisclosuremadeintheRHPofCAREwithrespecttotheRBIsletterdated

September26,2012andthestatusofitscomplianceweretrueandadequateasperClause

1ofFormCofScheduleVIofRegulation8(2)(b),Regulation57(1),Regulation57(2)(a)(ii)

and Regulation 64(1) of ICDR Regulations and Regulation 13 of Merchant Bankers

Regulationsreadwithclauses1,4,6,7and20ofCodeofConductforMerchantBankersas

specifiedinScheduleIII?

D.

Ifnot,whethertheBRLMs/theNoticeessuppressedmaterialfactsintheRHPofCAREand

attempted

to

mislead

the

investors

into

believing

that

RBI

had

unconditionally

exempted

eligiblenonresidentinvestors,intheircapacityastransfereeentities,fromtherequirement

toobtainaNoCfromtheirrespectiveregulatorsinrelationtoparticipatingintheOffer?

E. If so, did the BRLMs/ Noticees failed to exercise proper duediligence on their part in

violation of Clause 1 of Form C of Schedule VI of Regulation 8(2)(b), Regulation 57(1),

Regulation 57(2)(a)(ii) and Regulation 64(1) of ICDR Regulations and Regulation 13 of

MerchantBankersRegulations readwithclauses1,4,6,7and20ofCodeofConduct for

MerchantBankersasspecifiedinScheduleIII?

F.

Doesthe

violation,

ifany,

on

the

part

of

the

BRLMs/

the

Noticees

attract

monetary

penalty

underSection15HBoftheSEBIAct?

G. If so, what would be the monetary penalty under Section 15HB of SEBI Act against the

BRLMs/theNoticeestaking intoconsiderationthefactorsmentioned inSection15Jofthe

SEBIAct?



28/86


FINDINGS

33. Beforewemoveaheadtoexaminetheaforesaidissues,weneedtolookatthebackground

behindissue

of

letter

dated

September

26,

2012

by

RBI.

However,

even

before

we

delve

intothisaspect,wefirstneedtohaveanoverviewofthefollowing:

(A)

theForeignDirectInvestment(FDI)frameworkinIndia;

(B) theapplicableForeignInvestmentFrameworkasattherelevantpointoftime;and

(C) thebroaddetailsabouttheIPOofCARE

(A) ForeignDirectInvestment(FDI)FrameworkinIndia:AnOverview

TheFDIframework inIndia isgovernedbytheForeignExchangeManagementAct,1999along

withitsRegulations,theConsolidatedFDIPolicyandtheCircularsissuedtoAuthorisedPersons

byRBI from time to time.The ForeignExchange Management Act, 1999 (FEMA) is aCentral

StatuteoftheParliamentand istheSupremeActandwasenactedtoconsolidateandamend

the law relating to foreign exchange with the objective of facilitating external trade and

payments and forpromoting theorderly development and maintenanceof foreign exchange

market in India. The Parliament had enacted the FEMA to replace the Foreign Exchange

Regulation

Act,

1973

and

came

into

force

on

the

1st

day

of

June,

2000.

FEMA

and

the

Rules

and

Regulations issued under the FEMA regulate foreign investment in India. The relevant

Regulations for FDI are the Foreign Exchange Management (Transfer or Issue of Security by

Persons Resident Outside India) Regulations, 2000 (Notification No. FEMA 20/2000RB dated

May3,2000)(FEMARegulations).RBIisthenodalregulatoryauthorityforallmattersconnected

withforeignexchangetransactionsinIndia.Further,underSection10(4)and11(1)oftheFEMA,

RBIhasthepowertoissuegeneralorspecialdirectionsororderstoAuthorisedPersonsasthe

RBImay,fromtimetotime,thinkfitforthepurposeofsecuringcompliancewiththeprovisions

ofthe

FEMA

and

of

any

rules,

regulations,

notifications

or

directions

made

thereunder

Authorised Persons are the Authorised Dealers, Money Changers, Banks, etc., who are

authorisedbytheRBItodeal in foreignexchange.TheseCircularsareoperational instructions

fromtheRBItoBanks,etc.andaregenerallyknownasA.P.(DIRSeries)Circulars.Onceayear

on1stJulyofeveryyear,RBIissuesaMasterCircularwhichconsolidatesalltheexistingCirculars

atoneplace.MasterCircularsare issuedwithasunsetclauseofoneyear.TheDepartmentof



29/86


Industrial Policy and Promotion (hereinafter referred to as DIPP), Ministry of Commerce &

IndustryframestheForeignDirectInvestment(FDI)Policy inIndiawhichlaysdownthesectors

inwhich FDI is allowed, the conditions attached and the sectoral caps. It also laysdown the

sectorsinwhichFDIisAutomaticandthoseinwhichitrequiresApprovaloftheGovernmentof

India.The

FDI

Policy

is

prepared

in

the

form

of

the

Consolidated

FDI

Policy.

The

Policy

defines

FDI to mean investment by nonresident entities in the capital of an Indian company under

Schedule1ofFEMARegulations.TheForeignInvestmentPromotionBoard(hereinafterreferred

to as FIPB), Department of Economic Affairs, Ministry of Finance is a nodal authority for

approvingallFDIproposalswhichrequirepriorApprovaloftheGovernmentofIndia.TheFIPB

providesasinglewindowmechanismforallsuchFDIproposals,whicharenotpermissibleunder

the automatic route. The FDI Policy is notified by the RBI as amendments to the FEMA

Regulations.

(B) Foreign ExchangeManagement (Transfer or Issue of Security by Persons Resident

Outside India) Regulations, 2000 (NotificationNo. FEMA 20/2000RB datedMay 3,

2000)(FEMARegulations)

Withtheabove inplace,wewillnowmoveontohaveacloserviewoftheFEMARegulations.

The FEMA Regulations have from time to time on a progressive basis been liberalizing the

exchangecontrolregimeofIndia.Regulation5oftheFEMARegulations,inparticular,laysdown

the

terms

and

conditions

subject

to

which

foreign

investors

would

be

permitted

to

invest

into

Indiansecurities.Regulation5hasbeenclassifiedintoitssubcomponentsasfollows:

Regulation5ofFEMARegulations

Sub

Regulation

Dealswith Applicable

schedule

5(1) InvestmentsbypersonsorentitiesresidentoutsideIndia(other

than citizens of/ entity incorporated in Bangladesh and

Pakistan) under the Foreign Direct Investment Scheme (FDI

Scheme)

Schedule1

5(2) InvestmentsbyregisteredForeignInstitutionalInvestors(FIIs)

underthePortfolioInvestmentScheme(PISScheme)

Schedule2



30/86


Regulation5ofFEMARegulations

Sub

Regulation

Dealswith Applicable

schedule

5(3)(i) Investments by Non Resident Indians (NRIs) in shares and

debenturesof

an

Indian

Company

under

Portfolio

Investment

Scheme(PISScheme)

Schedule3

5(3)(ii) Investments by NRIs in shares and debentures of an Indian

Company on nonrepatriation basis other than under PIS

Scheme

Schedule4

5(4) Investments insecuritiesother thansharesanddebenturesof

an Indian Company by NRIs or registered FIIs or QFIs or any

otherpersonresidentoutsideIndiaincludedinSchedule5

Schedule5

5(5) Investments by registered Foreign Venture Capital Investors

(FVCI)

Schedule6

5(6) Trades of Registered FIIs in exchange traded derivative

contracts approved by RBI/ SEBI to be subject to limits and

margin requirements prescribed by RBI/ SEBI, as well as

stipulations regarding collateral securities as directed by RBI

fromtimetotime

5(7)

Investmentby

NRIs

in

exchange

traded

derivative

contracts

approvedby SEBI from time to timeoutof INR fundsheld in

India on nonrepatriable basis subject to limits prescribed by

SEBI

5(7A) InvestmentbyQFIsinsharesofIndiaCompany Schedule8

5(8) Topurchase,holdor sell IndianDepositoryReceipts (IDRs)of

eligible companies residentoutside Indiaand issued in Indian

CapitalMarketbyregisteredFIIs includingsubaccountsofFIIs

orNRIs

Para 2 of

Schedule7

FIIs can invest in aparticular issueof an Indian companyeitherunder Schedule 1or

Schedule2.Itcannot,however,availofboththeroutessimultaneouslyforaparticular

issue.



31/86


(C) InitialPublicOffer(IPO)ofCARE:ABroadOverview

As per the RHP of CARE dated November24,2012, the IPO ofCAREwas to open forpublic

subscription on December 07, 2012 and close on December 11, 2012. The Anchor Investor

Bid/OfferPeriodisoneWorkingDaypriortotheBid/OfferOpeningDate,inaccordancewiththe

ICDRRegulations.

The

Offer

opened

for

subscription

by

anchor

investors

on

December

06,

2012

and closed on the same day. An Anchor Investor in a public issue refers to a Qualified

InstitutionalBuyer(hereinafterreferredtoasQIBs)makinganapplicationforavalueofRs.10

croreormore.QIBsinteraliaincludeFIIsandsubaccountsregisteredwithSEBI.Theissuewas

bywayofanPublicOfferof71,99,700equitysharesoffacevalueofRs.10/ each forSaleby

thesellingshareholdersviz.IDBIBankLimited,CanaraBank,StateBankofIndia,IL&FSFinancial

ServicesLimited,TheFederalBankLimited,IL&FSTrustCompanyLimited(forequitysharesheld

onbehalfofMilestonePrivateEquityFund),MilestoneTrusteeshipServicesPrivateLimited(for

equity shares held on behalf of Milestone Army Trust), ING Vysya Bank Limited and Tata

InvestmentCorporationLimited.TheOfferPriceofCAREsequitysharesweretobedetermined

through the 100% bookbuilding process. Thus, the sale of equity shares by the Selling

ShareholdersundertheOffertobiddersincludingEligibleNonResidentInvestorswasataprice

discovered through theBookBuildingProcessprescribedunder theSEBIRegulationsandnot

throughthestockexchangesettlementmechanism.TheNoticeeswereappointedastheBRLMs

in respectof theOffer.M/s.Amarchand&Mangaldas&SureshA.Shroff&Co. (AMSS)were

appointed

the

domestic

legal

counsel

to

the

company/

CARE

and

M/s.

Luthra

&

Luthra

Law

Offices(togetherwithAMSS)wereappointedasthelegalcounseltotheBRLMs/Noticees.The

BidsbytheAnchorInvestorsaresubmittedandallocationtoAnchorInvestorsiscompletedone

WorkingDaypriortotheBid/OfferOpeningDate.TheQIBportionoftheOffer(includingthe

Anchor InvestorPortion)amountedtonotmorethan5