Authority: Kamlesh Chandra Varshney, Whole Time Member, Securities and Exchange Board of India

Order Date: July 15, 2026

Case Overview

The order pertains to an application filed by Mr. Sudarsan Varadaraj, as trustee of Varnam Securities Trust ("Proposed Acquirer"), seeking exemption from the mandatory open offer requirements under regulations 3(1), 4, and 5 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 ("SAST Regulations, 2011"). The application concerned the proposed acquisition of shares and voting rights in Elgi Rubber Company Limited ("Target Company"), a company listed on the National Stock Exchange of India Ltd.

The proposed acquisition involved two parts:

1. Direct Acquisition: Transfer of 2,13,15,350 equity shares (42.59% of paid-up capital) held by Sudarsan Varadaraj directly to Varnam Securities Trust.

2. Indirect Acquisition: Transfer of 34,95,770 shares (85.79% holding) in LRG Technologies Limited held by Sudarsan Varadaraj to the Trust. Since LRG Technologies itself holds 35,41,475 shares (7.08%) in the Target Company, this transfer constitutes an indirect acquisition of 7.08% voting rights in Elgi Rubber.

Both transfers were proposed to be executed by way of gift without any consideration. The Acquirer Trust is a determinate and irrevocable private trust settled by Sudarsan Varadaraj for the benefit of his immediate family and lineal descendants. The trustees are Sudarsan Varadaraj, Varshini Varadaraj (daughter), and Harsha Varadaraj (son), all existing members of the promoter group.

The key grounds for seeking exemption were that the transaction was an internal reorganization within the promoter family intended to streamline succession planning. The Acquirer Trust argued there would be no change in the beneficial ownership, control, or management of the Target Company; the promoter/promoter group shareholding percentage (65.03%) and public shareholding (34.97%) would remain unchanged; and the transaction was non-commercial and not prejudicial to public shareholders. The Trust also provided undertakings confirming compliance with the conditions stipulated in Chapter 8 of the SEBI Master Circular dated February 16, 2023.

SEBI's consideration noted that the Acquirer Trust was already part of the promoter group since December 2024 and that the proposed acquisition would attract the provisions of the SAST Regulations. However, it concurred with the applicant's arguments, finding that the transaction was a family reorganization with no change in control, beneficial ownership, or public shareholding.

Final Outcome

SEBI granted exemption to Varnam Securities Trust from the obligation to make a public announcement of an open offer for the shares of Elgi Rubber Company Limited. The exemption is subject to several conditions:

(a) The acquisition must comply with the Companies Act, 2013 and other applicable laws.

(b) A post-acquisition report must be filed with SEBI within 21 days of completion.

(c) All statements and facts in the application must be true and correct.

(d) The Acquirer Trust must comply with all statements, disclosures, undertakings made in the application, and the provisions of Chapter 8 of the SEBI Master Circular dated February 16, 2023.

(e) The Trust Deed covenants must not be contrary to the exemption conditions and must be modified if necessary.

The exemption is limited to the open offer requirement and does not exempt the parties from other disclosure obligations under the SAST Regulations, Prohibition of Insider Trading regulations, or LODR Regulations. The exemption is valid for one year from the date of the order (until July 14, 2027), within which the acquisition must be completed.

Topics: Takeover Regulations, Family Trust Reorganization