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·    It has now determined that the independent valuation report used to establish the share swap ratio is no longer valid and a new report will need to be undertaken in terms of FEMA requirements.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:

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.