TIDMTGR
RNS Number : 9305R
Tirupati Graphite PLC
11 July 2022
11 July 2022
Tirupati Graphite plc
('Tirupati', 'TG' or the 'Company')
Transaction Update
Tirupati Graphite plc (TGR.L, TGRHF.OTCQX) provides the update
below on the proposed acquisition of Tirupati Speciality Graphite
Private Limited ("TSG") under the agreement entered into on 10
October 2018 (the "SPA").
TSG was established to develop downstream flake graphite
projects and a research & development centre for graphene,
advanced materials and mineral processing technologies.
Tirupati entered into the acquisition agreement with TSG in
order to capture the benefits of vertical integration. The
agreement was for the acquisition of the then issued share capital
of TSG by way of a share swap (the "Proposed Acquisition").
However, the completion of the Proposed Acquisition under the
SPA has remained pending because:
-- The acquisition requires the approval of the regulators in
India under The Foreign Exchange Management Act ("FEMA") since it
classifies TG as an Overseas Direct Investment ("ODI"); and
-- It has now determined that the independent valuation report
used to establish the share swap ratio is no longer valid and a new
report will need to be undertaken in terms of FEMA
requirements.
As such, the timing for obtaining regulatory approval and the
consideration for the proposed acquisition continues to remain
uncertain. Furthermore, TSG has advised the Company that it needs
to explore alternative sources of capital to maintain its
development.
Next Steps
In response, the Company is considering a number of alternative
options to meet the objective of ensuring that TG is able to
continue with its plans to develop a downstream and advanced
materials business.
These options include:
-- continued pursuit of regulatory approval for the Proposed
Acquisition as its preferred option and in doing so, considering
any revised valuation for TSG and changes to the terms of the
Proposed Acquisition to reflect this;
-- exploring the possible participation in alternative
investment vehicles for investment in TSG as may be permissible
with participation of TG shareholders; and
-- exploring possible commercial arrangements with TSG.
The Company, TSG and their respective advisors, remain engaged
in working through various possibilities and the Company will
update the market on any further developments.
Shishir Poddar, Executive Chairman of Tirupati Graphite,
said:
"We remain committed to the development of a downstream and
advanced materials business to enable us to take advantage of the
benefits of being a vertically integrated graphite and graphene
business. Ideally, this would be through the completion of the
acquisition of TSG, but in recognition of the outstanding
regulatory hurdles and uncertain timeline to completion, the Board
has taken the pragmatic approach of exploring other routes to
achieve our ultimate objective while continuing to push forward
with the previous arrangement."
ENDS
For further information, please visit
https://www.tirupatigraphite.co.uk/ or contact:
Tirupati Graphite Plc
Puruvi Poddar - Chief of Corporate & Business admin@tirupatigraphite.co.uk
Development +44 (0) 20 39849894
Optiva Securities Limited (Broker)
Ben Maitland - Corporate Finance +44 (0) 20 3034 2707
Robert Emmet - Corporate Broking +44 (0) 20 3981 4173
FTI Consulting (Financial PR) +44 (0) 20 3727 1000
Ben Brewerton / Nick Hennis / Kelly Smith tirupati@fticonsulting.com
About Tirupati Graphite
Tirupati Graphite Plc is a specialist graphite and graphene
company. The Company places a special emphasis on "green"
applications, including renewable energy and energy efficiency,
energy storage and thermal management and is committed to ensuring
its operations are sustainable as well.
The Company's operations include primary mining and processing
in Madagascar, where the Company operates two key projects,
Sahamamy and Vatomina; 12,000 tpa installed capacity of
high-quality flake graphite concentrate with up to 96% purity is
currently being produced and sold to customers globally, planned to
increase to 84,000 tpa by end 2024 as per the Company's modular
medium-term development plan.
Proposed Acquisition Background
TSG is an Indian private company established by the founders of
TG who have been working in flake graphite and its derivatives for
over three decades. TSG was established to develop downstream flake
graphite projects and a research & development centre for
graphene, advanced materials and mineral processing technologies.
The Company entered into an agreement with TSG & its
shareholders for the acquisition of the then issued equity capital
of TSG under a share swap deal for integrating the downstream
graphite and advanced materials business that its founders were
pursuing and further aligning the interests of the Company and its
founders.
Since TG is an Overseas Direct Investment ("ODI") under The
Foreign Exchange Management Act ("FEMA") any investment by TG in
India requires prior approval of the regulators in India Under
FEMA. The Proposed Acquisition was therefore conditional upon
mandatory regulatory approvals under FEMA. The Company was also
obligated under the SPA to meet all further investment requirements
of TSG.
In terms of FEMA requirements, the share swap ratio under the
SPA was ascertained under a Valuation Report issued by a Securities
and Exchange Board of India ("SEBI") approved Category 1 Merchant
Banker. Post execution of the SPA, upon engagement with the
regulators for the mandatory approval required under FEMA, certain
pre-requisites were advised by the regulator being:
o Establishing a bona fide purpose for the acquisition; which
could be established with the business integration and
demonstration of capital for required investments
o Establishing 'no round tripping'; which could be demonstrated
by list of subscribers for capital raised from London markets
o Establish TG as a well-regulated "foreign" entity; this also
could be established with the listing on the main market of the
London Stock Exchange (the "IPO").
These pre-requisites could be established upon the IPO and the
related equity fundraising being completed. However, the IPO
fundraise resulted in dilution of the concert party identified with
the Takeover Panel resulting in it holding between 30% and 50% of
the issued ordinary shares in the Company, thus necessitating a
whitewash under Rule 9 of The Takeover Code for the issue of the
consideration shares under the SPA if this were not to trigger a
mandatory offer for the Company under the Takeover Code.
After approaching the Indian regulator following the whitewash
approval on 28 October 2021, the Company was advised that:
o the valuation report of 2018 is time expired and for
determining the swap ratio a current valuation in accordance with
FEMA requirements is necessary (which must be not more than 90 days
old at the time of completion of the Proposed Acquisition);
o Based on an updated valuation, the Proposed Acquisition could
be considered for approval by the Indian regulators once certain
reported matters in relation of the Company as an ODI were
ratified.
The timing for obtaining regulatory approval and the
consideration for the Proposed Acquisition therefore continue to
remain uncertain.
Efforts of the Company to progress investment in TSG by way of
subscription to new shares in the interim, have met with similar
regulatory hurdles. The Company has been advised by TSG that it is
expedient for it to explore alternative sources of capital for its
developments. Given the uncertainties on the ability of the Company
to be able to provide this capital, TSG has advised the Company
that it would be open to subscription by a non ODI entity in UK
with participation of TG shareholders in such entity if TG so
desired.
In this background the Company, TSG and their respective
advisors, remain engaged in working through various
possibilities.
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END
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