Sub: Review of Rights Issue Process and Procedures

1.0

OBJECTIVE This memorandum seeks to place before the Board, certain proposals to make Rights Issue process more efficient. The proposals contained in this memorandum relate to : (i) ASBA process for Rights Issues; (ii) Electronic Rights Entitlement and (iii) Access to proceeds from Rights Issues to the issuer.

2.0

BACKGROUND

2.1

SEBI, vide its circular dated August 28, 2008, reduced the timelines for Rights Issue. The minimum and maximum time period for which a Rights Issue can remain open has been reduced to 15 days and 30 days from the earlier 30 and 60 days respectively. Also, the timelines for making the allotment/ refund has been reduced to 15 days from the earlier 42 days from the date of closure of the Rights Issue. SEBI is also discussing rationalization of disclosure requirements for Rights Issue in SEBI Committee on Disclosures and Accounting.

2.2

While SEBI has taken some steps to simplify/ streamline the Rights Issue process as indicated above, it is felt appropriate to review other aspects of Rights Issues with an objective to further streamline the Rights Issue process. The memorandum contains proposals on the following:

a. Implementation of Applications Supported by Blocked Amount (ASBA) process in Rights Issues; b. Introduction of Electronic Rights Entitlement; c. Modification in the existing provisions in DIP Guidelines pertaining to use of Rights Issue proceeds.

3.0 3.1

PROPOSALS Implementation of Applications Supported by Blocked Amount (ASBA) process in Rights Issues

The Board, in its last meeting, was informed about the status of implementation of ASBA in the IPO of 20 Microns Ltd., where ASBA process was first implemented. Page 1 of 22

The Board was also informed that vide instructions circular dated September 25, 2008 , SEBI , on pilot basis, enabled ASBA in two Rights Issues namely Tata Motors Ltd. and Sadhana Nitro Chem Ltd , with some modifications in ASBA process namely (i) ASBA to be used by all shareholders, as against only retail individual investors in public issues; (ii) direct transfer of data from banks to

registrars and vice- versa, as per the mutually agreed process, till web enabled interface of stock exchanges is ready; (iii) transfer of funds to the issuers account before finalisation of basis of allotment and direct credit of excess funds, if any, to ASBA shareholders etc.

3.1.1 While we are yet to receive final data/ feedback regarding the aforesaid two Rights Issues (as on the date of the Memorandum), it may be stated that it would be beneficial to investors if ASBA is extended as an additional mode for all issues including Rights Issues and Fixed Price Public Issues, with customized modifications in the process for each type of issue, in a gradual and phased manner.

3.1.2 Since the ASBA process has already been tested for 2 Rights Issues, it is proposed that SEBI (DIP) Guidelines may be amended to extend ASBA to Rights Issues, once the stock exchanges are ready with the web enabled interface for entering Rights Issue application data.

3.2

Introduction of Electronic Rights Entitlement (ERE)

3.2.1 It was felt that concurrent with the reduction in the timelines for Rights Issue, the various procedures involved in a Rights Issue may also be examined from the perspective of making it electronic, thereby making the process faster, minimizing manual intervention and improving the efficiency of the process.

3.2.2 A key feature of Rights Issue is rights renunciation wherein the shareholder can renounce his/ her Rights Entitlement (RE), in part or full. As per the data received from two registrars (names of registrars excised for reasons of confidentiality) for 10 Rights Issues handled by them (Annexure A), it may be seen that renunciation right is being used in all Rights Issues with percentage of shares renounced varying from as low as 0.5% (in case of Reliance Enterprises Ltd. ) to as high as Page 2 of 22

60.63% (in case of Fortis Financial Services Ltd.). In terms of number of shares renounced, the said number has varied from as low as about 33 thousand shares (in case of ITD Cementation India Ltd. ) to as high as more than 3.30 crore shares (in case of Hindalco Industries Ltd.) and the number of renouncees has varied from 245 in ITD Cementation India Ltd. to 11249 in Hindalco Industries Ltd.

Currently RE of the shareholders are communicated to the shareholders through a composite application form which has four parts, namely Part A for application by the shareholder, Part B for renunciation of RE by the shareholder, Part C for application by the renouncee and Part D for request for split application forms. A shareholder intending to renounce his/her RE fills up part B of the application form. The renouncee can trade this form or apply in the Rights Issue by filling up Part C of the form. Renunciation forms are traded in physical segment in Bombay Stock Exchange. The registrar captures details of shares applied for by shareholders, renouncees and then finalizes the basis of allotment. In the current process, a renouncee has to necessarily apply in part C of the application form. The process of renunciation and its further trading is paperbased and results in administrative and procedural delays in completing the Rights Issue process. Therefore, it was felt that there is scope for exploring the possibility of electronic processing of renunciation of RE.

3.2.3 SEBI placed a paper for discussion on the matter before Primary Market Advisory Committee (PMAC) in its meeting held on September 5, 2008 and subsequently on SEBIs website for public comments. The paper placed on SEBIs website is given in Annexure B. A total of six public comments were received. The same have been examined and suitably incorporated in the final proposals in this regard. A summary of the comments received and our views on the same is given at Annexure C.

3.2.4

It may be noted that unlike a public issue where section 68B of the Companies Act mandates that issues of size of more than Rs.10 crores shall be made in demat form only (i.e. all the allottees have to be allotted the shares in electronic form), in a Rights Issue, shares are to be allotted to all the shareholders including those who have exercised the option of keeping their shares in physical form. The company is thus required to issue physical shares to such shareholders. From the data in respect of total 20 Rights Issues (Annexure D), it is noted that there is a sizeable Page 3 of 22

number of shareholders having shareholding in physical form. For example, in the Rights Issue of GATI Ltd., 24.7% shareholders were allotted shares in the physical form. On account of the sizeable presence of shareholders holding shares in physical form, it is perhaps not appropriate to mandate a totally electronic RE process and any proposal for electronic RE process has to necessarily run alongside the present physical process.

3.2.5 In view of the foregoing, it is proposed that ERE may be introduced with the following main features:

a. There shall be two modes of giving RE namely (i) Physical Rights Entitlement (PRE) as per the present practice where details of RE are printed in Part A of the composite form; and (ii) Electronic Rights Entitlement (ERE).

b. PRE shall be sent only to those shareholders who are holding shares in physical form.

c. ERE with a separate ISIN would be credited to the demat account of shareholders holding shares in electronic form as on the record date, as per the rights ratio declared by the Board of the Company.

d. PRE will continue to be traded in physical segment of Bombay Stock Exchange as is the case presently.

e. ERE will be traded on the platform of the stock exchanges electronically on T+2 rolling settlement basis where T is the date of trading. All trades in RE shall be closed out on the settlement date and there shall be no auction.

f.

Trading in RE, both in the case of PRE and ERE, will be suspended four working days prior to the closure of the Rights Issue, which will provide at least two working days for settlement of the trades.

3.3

Review of Clause 8.19 of the SEBI (DIP) Guidelines

Page 4 of 22

3.3.1 Clause 8.19 of the SEBI (DIP) Guidelines provides that in a Rights Issue, the issuer may utilize the issue proceeds collected after satisfying the designated stock exchange that minimum 90% subscription is received. Hence in a Rights Issue, issue proceeds can be transferred to the issuers account even before basis of allotment is finalized which is different from a public issue where he issuer company, in terms of Section 73 of Companies Act, can access the issue proceeds only after allotment and listing is completed.

3.3.2 The time period for allotment of shares from closure of the Rights Issue now stands reduced to a maximum of 15 days (from the earlier maximum period of 42 days). It may also be relevant to mention here that it is proposed to implement ASBA in all Rights Issues, as stated under para 3.1 above. ASBA envisages issue proceeds to be transferred to the issuers account only to the extent of allotment, after the basis of allotment in the issue is finalized. This ensures that (a) the investors account is debited only to the extent required and (b) there is no refund involved and thus no attendant hassles. Therefore, providing flexibility to issuer to access the Rights Issue proceeds, before basis of allotment is finalized, militates against the purpose of ASBA.

3.3.3 In view of the above, it is proposed that clause 8.19 of the SEBI (DIP) Guidelines may be modified accordingly.

4.0

The Board is requested to consider and approve the proposals contained in para 3.1.3, 3.2.6, 3.2.7 and 3.3.3 above and authorize the Chairman to take necessary consequent steps to give effect to the decisions.

Page 5 of 22

Annexure A Data on renunciation in Rights Issues (As received from the registrars) Sl. No. Name of the issue Details of renunciation requests received No. and % of investors who applied for renunciation. No. of renouncees Amt and % of shares renounced. (% vis a vis total shares offered in rights issue) Shares % of % to no. of Amount of renouncee Renunciatio renunciation shares renoun n s ced (Rs.) 12.0 693049 16.6 37424646 6.2 2052026 10.8 359104550

1 2

10

GATI LIMITED NICHOLAS PIRAMAL INDIA LIMTED HINDALCO INDUSTRIES LIMITED HBL NIFE POWER SYSTEMS LIMITD MORARJEE TEXTILES LIMITED ITD CEMENTATI ON INDIA LIMITED RELIANCE ENTERPRISE S LIMITED CHOLAMAND ALAM DBS FINANCE LIMITED ITD CEMENTATI ON LIMITED DHANALAKS HMI BANK LIMITED

1036 3791

5.7 11249 14.9 514 157441600 793245600

33051900

14.3

1574416

71.3

9.2 688 8.8 245 16366980 22253110

404602

5.2

33402

2.9

14.4 7426 12.2 1074 31532620 128430400

642152

0.5

225233

1.6

14.1 897 12.0 452 584703152 575637425

1354441

23.5

9430696

29.4

Page 6 of 22

Annexure B

Discussion paper on electronic Rights Entitlements as put on the SEBI website

Proposed Electronic Rights Issue Process and e-trading of Rights Entitlements SEBI has recently reduced the timelines for a Rights Issue. SEBI is also looking at further rationalizing the disclosure requirements in the Letter of Offer for a Rights Issue. While SEBI has taken various steps to simplify/ streamline the rights issue process, it is felt appropriate to also examine various procedures involved in the rights issue, from the perspective of making it electronic, thereby minimizing manual intervention and improving the efficiency of the process. Right Issues also have the key feature of rights renunciation. As on the date, there is no platform for electronic trading of rights entitlements. However, it is understood that rights entitlements are presently traded in a physical form. In view of same, a uniform and exchange driven electronic mode for trading of rights entitlement, is envisaged . A paper outlining the procedure for a Rights Issue as envisaged, for electronic trading of rights entitlement, is placed below. Comments / suggestions are invited on the proposed process electronic trading of rights entitlements. Comments/ suggestions may be sent to the address mentioned below to Mr Sudeep Mishra, Assistant General Manager, Division of Issues and Listing, Corporation Finance department, Securities and Exchange Board of India, before September 25,2008: SEBI Bhavan, Plot No: C 4A, G Block, Bandra Kurla Complex, Mumbai 400 051. Comments/suggestions may also be emailed to sudeepm@sebi.gov.in or to niteshb@sebi.gov.in before September 25, 2008.

Page 7 of 22

Paper for public comments on Proposed Electronic Rights Issue Process and e-trading of Rights Entitlements 1. SEBI has recently issued revised timelines for right issues. While SEBI has taken the step of introducing reduced timelines, it is felt appropriate to also examine various steps involved in the rights issue, from the perspective of making it electronic, thereby minimizing manual intervention and improving the efficiency of the process.

2. This paper attempts to examine the trading of rights which can be made electronic. 3. Important features of Rights Issue different from a public issue are: Shares are offered to existing shareholders in the first instance as against to public at large (unknown investors) in a public issue Shareholders can renounce their rights entitlement (REs) as against no right created in public issue, which can be renounced. Allotment is made based on shareholding as on record date as against Proportionate allotment based on application size in public issues. Rights issue application form is different from public issue application form as the former has three parts. Part A deals with application by the shareholders (including request for additional shares), Part B deals with form of renunciation to be filled in by the shareholders who desire to renounce their RE and Part C deals with application by renouncee(s). Also, shareholders can request for split application forms wherein they want to renounce only a part of their entitlement and want to apply for the rest of their entitlement or the shareholders want to renounce their entitlement in favour of more than one person. All details of shareholders on a record date is available with the company, other than those who have purchased RE from the market and become eligible for rights issue subsequently.

4. Among other features, the feature of right of renunciation requires special mention. Therefore, any attempt to make the Rights Issue process electronic has to necessarily take into consideration the procedures pertaining to this right. 5. It is understood that the rights entitlement are presently traded in a physical form where a shareholder who does not want to subscribe to his/her RE can sell his/her RE and thereafter the RE keeps on changing hands upto the time specified for the trading. 6. After taking in to account various distinct features of rights issue, the following process of rights issue is envisaged: (A) Electronic Rights Issue Process - This process shall apply to shareholders who have an active demat account and hold shares in demat form as on the record date for the rights issue. This process envisages renunciation/trading of RE in electronic form on the stock exchange platform and

Page 8 of 22

(B) Physical Rights Issue Process - This process shall apply to shareholders who hold shares in physical form as on the record date for the rights issue. This process envisages physical renunciation/trading of RE as per the present practice. (A) Electronic Rights Issue Process a. The issuer fixes a Record date to identify eligible shareholders. These shareholders would be entitled to subscribe to the proposed Rights Issue.

b. The issuer dispatches a letter to each shareholder informing that the rights entitlements have been credited into their respective demat accounts and duration of trading in RE and attaching the Letter of Offer and a Blank Application Form (unlike the present form which has shareholders name and entitlement printed on it) to all the shareholders on the record date. c. The blank application forms shall also be available with the stock exchanges, merchant bankers and brokers. Further, soft copy of the same shall be available on the websites of the aforesaid intermediaries. d. The registrar, on the instruction of the issuer, shall through credit corporate action, credit the RE in the given ratio into the demat accounts of the eligible shareholders (as on record date). e. The Rights issue shall thereafter open for (a) subscription and (b) renunciation/trading of RE electronically through the stock exchange platform. f. Trading will happen in REs on the secondary market platform of the stock exchanges as it happens in case of ordinary shares. To separate the trading of REs from the trading of ordinary shares, a separate ISIN shall be given for the REs. g. Shareholders, who do not want to exercise their RE, can renounce their RE by selling their REs on the electronic trading platform of stock exchanges. h. The shareholders who have not renounced their RE and the renouncees who dont want to renounce their RE further shall apply for shares against their RE during the issue period (which includes the trading period of RE) by submitting the application form received with the Letter of Offer/downloaded blank application form or by submitting the required information on a blank paper and submit the requisite payment instrument to Bankers to the issue (i.e as per the current practice ) i. Trading of RE may close at least 3 working days before closure of the rights issue so as to avoid last minute rush in submitting applications and to ensure that beneficial owner of REs have sufficient time to submit an application form. Once trading of REs closes, ISIN assigned to REs shall be suspended.

j. After the closure of trading and settlement of the trades done, the depositories shall make available the list of RE holders on the date the Page 9 of 22

ISIN was suspended and the list of shareholders on the record date to the registrar with their respective number of REs. k. Thereafter, the registrar shall reconcile the application by matching the number of shares applied for with number of RE available in the respective demat accounts based on the aforesaid list.

l.

The registrar shall finalise the allotment and thereafter on the instruction of the issuer, credit the rights shares through a credit corporate action, to the respective demat accounts.

m. Thereafter, the registrar shall through a corporate action, debit the REs from the respective demat accounts for (a) shares allotted and (b) lapsed REs. (B) Physical Rights Issue Process a. The issuer fixes a Record date to identify eligible shareholders. These shareholders would be entitled to subscribe to the proposed Rights Issue.

b. The issuer dispatches the Letter of Offer and Composite Application Form (CAF) with a pre-printed unique no., name of the shareholder and his/her entitlement, to all the eligible shareholders on the record date. c. The Rights issue shall thereafter open for (a) subscription and (b) renunciation/trading of RE physically. d. The shareholders who have not renounced their RE and the renouncees shall apply for shares against their RE during the issue period (which includes the trading period of RE) by submitting the CAF or by submitting the required information on a blank paper and submit the requisite payment instrument to Bankers to the issue (i.e as per the current practice ) e. Trading of RE may close at least 3 working days before closure of the rights issue so as to avoid last minute rush in submitting applications and to ensure that beneficial owner of REs have sufficient time to submit an application form. f. The Bankers to the Issue shall send the CAF/blank paper application to the registrar. g. Thereafter, the registrar shall reconcile the application form as per the current practice. h. The registrar shall finalise the basis of allotment and send the physical share certificates to the shareholders.

Page 10 of 22

Annexure C Summary of public comments and our comments on the discussion paper on electronic Rights entitlements

Public Comments on Proposed Electronic Rights Issue Process and e-trading of Rights Entitlements S. No . 1 From the Core Group of the Institute of Company Secretaries of India received vide email dated 24/09/08 Applications Forms in a Rights Issue These are suggestions relating to should be uniform for both physical process which may be appropriately and electronic process as at present considered while finalizing the policy. with the details of DP ID & Client ID, CAF No., shares held on record date and entitlement. Issues on which comment was Our observations / examinations received

Whether a renounce in a Rights The matter has been legally examined at Issue can further sell the Rights SEBI. Legal Department of SEBI is of the view that a renouncee in a Rights Entitlement Issue can further sell his Rights Entitlement. There should be a process in the These are suggestions relating to electronic trading of Rights process which may be appropriately Entitlements to identify the considered while finalizing the policy. renouncees so that such renouncees applying for additional shares are given the least preference as per the existing practice. These are suggestions relating to In case a shareholders sells process which may be appropriately his/her Rights Entitlement and considered while finalizing the policy. thereafter acquires Rights Entitlement from the market, whether he/she can apply for additional shares needs to be These are suggestions relating to examined. process which may be appropriately Assuming a shareholder holding considered while finalizing the policy. 200 rights entitlement and acquires Page 11 of 22

100 additional entitlement from the market under the same A/c and in case he applies for additional the manner in which the entitlement of the additional will be calculated needs to be addressed. In the physical segment, where such an eventuality happens, he will be entitled for additional shares only in respect of his holding of 200 held by him and in respect of the 100 shares acquired from the market he will not be entitled to apply for anything additional or would be given the least priority in These are suggestions relating to apportioning the additional shares process which may be appropriately considered while finalizing the policy. to him. Blank paper application should be allowed only in respect of shareholders and renouncees applying for shares in the physical These are suggestions relating to segment should have to process which may be appropriately necessarily submit the CAF by considered while finalizing the policy. which the entitlement was renounced in their favour. It is possible that as on the record date shares acquired on behalf of a client are lying in the account of the clearing member(s) and accordingly the rights entitlement also gets credited to the clearing member(s). It is suggested that when the clearing member transfers these rights entitlement to his client it should not be treated as renunciation. The client should have the right to apply for additional shares and should be allowed the benefit which is normally allowed for a shareholder treating him as a holder as on the record date.

From Prashant Kolhe, ENAM Securities Pvt Ltd received vide email dated 26/09/08

Page 12 of 22

 It is proposed that the electronic rights issue process will apply to those shareholders who have active demat accounts and hold shares on the record date for the rights issue. Shareholders whose demat accounts are inactive either voluntarily or due to non compliances, will neither get RE in electronic form nor in physical form and will lose on renunciation facility. It is thus suggested that the depositories allow for such credit irrespective of whether the account is active or not. Alternatively such shareholders may be allowed to participate in the physical rights issue process.

These are suggestions relating to process which may be appropriately considered while finalizing the policy.

These are suggestions relating to process which may be appropriately It is proposed that the trading of considered while finalizing the policy. Rights Entitlement may close at least 3 working days before closure of rights issue. Once trading of Rights Entitlement closes, ISIN assigned to Rights Entitlement shall be suspended. After the closure of trading and settlement of the trades done, the depositories shall make available the list of Rights Entitlement holders on the date the ISIN was suspended. This assumes that trade is settled on the date ISIN is suspended i.e. also the day when trade has happened. If the trading and settlement is to be thru the stock exchange mechanism then trading and settlement cannot happen on the same day. Thus there could be a need to provide sufficient gap between trading and download of eligible shareholders list by the registrar.

From S. Ramanujam, Intime Spectrum Registry Ltd received vide email dated 25/09/08 Applications Forms in a Rights Issue These are suggestions relating to should be uniform for both physical process which may be appropriately Page 13 of 22

and electronic process as at present considered while finalizing the policy. with the details of DP ID & Client ID, CAF No., shares held on record date and entitlement. In Rights Issue, since it is an These are suggestions relating to entitlement, applications for process which may be appropriately Additional shares are considered in considered while finalizing the policy. the proportion of Entitlements. Shareholders, who partly renounce are not eligible for additional shares.In the proposed methodology, we will have a situation where existing shareholder sells part of his REs and applies for additional shares. Since this happens without physical splitting of Forms, the registrar has to keep a system check on such applications.

Renouncees who apply for These are suggestions relating to additional shares are kept last in the process which may be appropriately order of priority and will be eligible considered while finalizing the policy. for additional shares only if others applications for additional shares are fully satisfied. These are suggestions relating to Similarly, an existing shareholder process which may be appropriately having 100 REs may acquire 30 considered while finalizing the policy. REs from the market. If he applies for 200 shares, he should be eligible for 130 shares as entitlement and additional shares in proportion to his entitlement of 100 and not 130.Thus in the Rights Issues, it is essential to distinguish between the Shareholders and their REs as on the record date and those at a later date. Hence the registrar will be required to match the applications with the original entitlement as on the Record date as also the no. of REs in the account of the Shareholder on the cut-off date when the trading of REs ceases. From Samar Banwat, National Securities Depository Ltd received vide email dated 26/09/08 It may please be clarified in the These are suggestions relating to scheme that there will be no process which may be appropriately Page 14 of 22

dematerialization and considered while finalizing the policy. rematerialisation of rights entitlements (RE) since there are no certificates in physical form for REs. Agreed. The ISIN for RE will have to be suspended immediately after the closure date of the issue. The last day of trading for RE may be decided in such a manner that all trades done till the last day of trading are settled at least two days These are suggestions relating to before the closure of the issue. process which may be appropriately considered while finalizing the policy. On request from the issuer/its R&T Agent, the depositories will provide the list of RE holders as on the date These are suggestions relating to of closure of issue. process which may be appropriately For the physical rights issue considered while finalizing the policy. process, the registrar will send either the physical share certificates or credit the rights shares in demat accounts, depending upon the option exercised by the investor.

From Abhijit Vaidya, Kotak Mahindra Capital Company received vide e_mail dated 25/09/2008 Settlement Process for trading of Rights Entitlements: The trading These are suggestions relating to and settlement practices for rights process which may be appropriately entitlements may need to be considered while finalizing the policy. described and enabling systems may need to be created with stock exchanges.

Not related to the discussion paper. Simplified disclosure norms and eligibility criteria for limited disclosure norms: Companies with established track record of corporate governance, compliance with listing norms may be allowed to make limited disclosures in the offering circular. Since significant amount of information is publicly available, we would like to recommend that offering circular for rights offering should only contain risk factors, objects of the Page 15 of 22

issue, last three years consolidated financials, litigations against the Company and terms of the issue. Companies with good track record of dealing with investor complaints, compliance with minimum public shareholding limit and market capitalization of over say Rs 5,000 crores can be given the benefit of limited disclosures norms. For all other companies who do not fulfill any of these conditions, may be required to make disclosures at par with QIP disclosure norms. This would allow companies to consider rights offering option at par with Not related to the discussion paper. QIP in terms of disclosure norms. Simplified regulatory review process: We recommend compressing timeline for regulatory review process for rights offering. Ideally, to make this product more comparable with QIP, it should be allowed to directly file offer document with stock exchanges. However, since retail investors also participate in the offering, we suggest a simplified regulatory review process may be adopted. We suggest that SEBI review process for rights offering may be reduced to 10 days. Also stock exchanges should either do away with in-principle approval requirement or give the same in 3 days. Further in-principle approval should be obtained from only BSE and NSE and not all exchanges where shares are listed. Alternatively, fast track norms for rights offering could be relaxed to lower market capitalization level of say Rs 5,000 crores. We believe that since rights offering process primarily allows existing investors to apply, a lower market capitalization limit of say Rs 5,000 Not related to the discussion paper. crores will allow larger number of companies to benefit from the fast track guidelines. Streamlining timelines for rights Page 16 of 22

offering: SEBI has recently made significant changes positively impacting timeline. We believe, there is further scope to shorten the timelines. We recommend that rights issue be allowed to remain open for only 7 days and can be extendable upto 30 days. This would allow reducing pricing risk These are suggestions relating to for issuers further. This however, process which may be appropriately may require corresponding change considered while finalizing the policy. in the Companies Act. This could potentially provide little time for allowing split form requests to be entertained for physical holders. This can be addressed by either (a) issuing CAFs to investors into two or three lots in some suitable manner to reduce his inconvenience. For e.g. if investor is entitled to apply for 1000 shares, instead of providing one CAF for 1000 shares, we can issue 4 CAFs for say 500, 200, 200 and 100 shares or (b) require physical shareholders to intimate registrar of the company before the record date about split form requests. This would enable registrar to issue CAFs in suitable lots and avoid need for splitting entitlements later or (c) intimate physical shareholders their entitlement and provide blank forms (and not CAF) as proposed for demat holders. Additional forms can be made available with bankers to the issue, company and registrar. Based on our experience, we understand from To be examined separately. registrars that they typically receive very few requests for splits. We believe any of these mechanisms can adequately deal with the issue of split form requests and allow shorter time for issue period. Need to define undersubscription: We believe it will be beneficial to set uniform standard for determining what constitutes under-subscription for Page 17 of 22

the purpose of allowing promoters to acquire undersubscribed portion of the rights issue as permitted under the clause 3(1) (b) of SEBI (SAST) Regulations 1997(Takeover Code). Subject to compliance with the conditions mentioned in the Takeover Code, such undersubscribed shares may be allotted to person presently in control of the Company through any or all of the following: Purchase of renunciations; Application for additional shares i.e. along with his entitlement for rights offering; Application by existing shareholders for renounced portion acquired in (1) above; Application by renouncee for additional shares; Allotment by Board post-closure if the issue remains undersubscribed.

From Ranganath Char, JM Financial Consultants Pvt. Ltd. received vide e_mail dated 25/09/2008

Suggestion 1:

There is a need to ensure that the These are suggestions relating to investors do not have a chance to process which may be appropriately trade renunciations after applying considered while finalizing the policy. for the same. We therefore suggest a demat escrow mechanism be in place into which the renunciations are credited before the applicant makes an application, just like in takeovers and buybacks. Page 18 of 22

Suggestion 2: Trading in renunciation should close We are providing that trading shall stop earlier than 3 days before closure of 4 days before closure of the issue to issue so that the renunciation trades enable settlement of the trades done. are settled much before the closure of the issue. Based on the current T+2 settlement cycle, this would mean that the trading in renunciations should close 6 working days before the closure of the issue. This will ensure adequate time in the hands of the investors to apply through the renunciation route. These are suggestions relating to process which may be appropriately Depositories require adequate considered while finalizing the policy. authorization before they put through any corporate action such as in-principle approvals from the Stock Exchanges. Similar authorization mechanism may be needed to be put in place on the basis of which the corporate actions for rights renunciation can be These are suggestions relating to process which may be appropriately affected by the depository. considered while finalizing the policy. Suggestion 4: Suggestion 3: Application forms should continue to allow for investors to apply for additional shares. This will ensure that investors can be allotted shares against unsubscribed entitlement without incurring additional cost of acquiring renunciations. As you are aware this facility is currently available for shareholders and renouncees in rights issues. Suggestion 5: Electronic trading of rights entitlements may result in creation of a false market which could impair the price of the equity shares given the lower liquidity of the rights entitlements. Suitable check and balances need to be established to limit such a scenario of impairment of price. We do not see much concern here as there will be an audit trail of all the trades done as all the trades shall be routed through the demat accounts. This will be an adequate safeguard against attempts at creating a false market in the shares of the issuer company.

Page 19 of 22

Page 20 of 22

Annexure D Data on allotment in physical form in Rights Issues (As received from the registrars) Sl. No. Name of the issue Details of allotment in physical No & % of investors Amount and % of Shares

Physical % of Investor investor s s 1 2 GATI LIMITED NICHOLAS PIRAMAL INDIA LIMTED HINDALCO INDUSTRIES LIMITED HBL NIFE POWER SYSTEMS LIMITD MORARJEE TEXTILES LIMITED ITD CEMENTATI ON INDIA LIMITED RELIANCE ENTERPRIS ES LIMITED CHOLAMAN DALAM DBS FINANCE LIMITED ITD CEMENTATI ON LIMITED DHANALAKS HMI BANK LIMITED GRUH FINANCE LTD 2127 8661 24.7 14.1

Total Allote es 8605 61454

Issue Physical % to Holding Physical Capital Holding 71542 545080 1.7 2.9 4177492 18997128

Amount of Physical Shares 3863268 95389000

18394

9.4

19639 0 3452

1359581 5 195743

5.9

231936993

326299560

642

18.6

8.9

2207232

19574300

990

13.2

7499

52455

0.7

7786913

2885025

290

10.4

2782

8336

0.7

1151539

4084640

9907

19.2

51613

2250088

1.7

135044730

450017600

944

10.7

8786

85217

0.6

14229929

11930380

409

6.4

6347

36367

0.6

5757690

15455975

10

678

18.1

3756

577970

1.8

32057800

35834140

11

1090

12.3

8846

196261

2.5

7950000

14719575

Page 21 of 22

12

13

14

15 16

JMC PROJECTS (INDIA)LTD TATA COFFEE LTD TATA TELESERVI CES LTD TRENT LTD FORTIS FINANCIAL SERVICES LTD HINDUSTAN OIL EXPLORATI ON LTD (2007 ) TATA STEEL LIMITED (EQUITY) THE INDIAN HOTELS COMPANY LTD. (EQUITY) GODREJ CONSUMER PRODUCTS LTD.

152

2.4

6401

21405

0.5

4646550

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15.3

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14.1 18.7

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2.6 0.8

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41046000 1017570

17

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7.5

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18

85083

19.3

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2.8

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19

6288

7.0

2367535

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120553795

20

2344

13.6

17203

140292

0.4

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17255916

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