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The Securities Appellate Tribunal (SAT) has directed the Securities and Exchange Board of India (Sebi) to respond in two weeks to Gillette India on why it had rejected the company’s proposed route to meet the minimum public shareholding requirement.
This is the second time the SAT, a quasi-judicial body where aggrieved entities can appeal against Sebi, is asking the capital markets regulator to provide a reason for the refusal to Gillette.
Issued today, the directive follows an application by Gillette to SAT that Sebi had not given it a rationale for turning down the multinational consumer goods company’s plan to comply with the public shareholding requirement even after two months of the appellate body’s first order, in February.
In February, SAT had only asked Sebi to pass a ‘reasoned order’ for refusing to accept the route Gillette had proposed; it had not set a deadline.
Sebi rules require companies to bring down the promoter shareholding to below 75 per cent before June this year. Gillette India wants to achieve this through a ‘sell-down’ proposal. As part of this, its chairman, S K Poddar, who owns eight per cent in the company, would cease to be a promoter and also step down from his post. Following this, his shareholding would be classified as non-promoter holding.
As on December 2012, the promoter holding in Gillette India was 88.76 per cent.
In October last year, Gillette had sought guidance from Sebi in this regard. A month later, Sebi said the proposed transaction was not acceptable. Following this it approached SAT for being “summarily rejected without assigning any reasons”.
A person close to this development told Business Standard the company sent several reminders to Sebi but didn’t get any response. It had to move SAT again, as there are less than two months left for the deadline to achieve a 25 per cent minimum of public holding.
The reason for delay from Sebi could not be ascertained. An email sent to Sebi remained unanswered till the time of going to press.
But a Gillette spokesperson said, “We are committed to complying with the new law and engaging with Sebi to achieve compliance with the minimum 25 per cent public shareholding requirement norm. Since the matter is before the regulator, it would not be appropriate for us to comment further on this.”
Sebi’s reasoning in the Gillette case will be keenly watched, as some other companies with high promoter holding plan a similar route. For instance, Bangalore-based textile firm Gokaldas Exports has already reclassified its founders, the Hinduja family, as public shareholders instead of promoters. Though the promoter holding in the company has come down to below 75 per cent, whether Sebi has accepted this route for compliance is not known.
Sebi has prescribed an offer for sale, an institutional placement programme, and a rights & bonus issue as routes for companies to pare promoter holding. If a company wishes to take any other route than these, it has to get prior Sebi approval.
NOT A SMOOTH SHAVE
- Oct, 2012: Gillette India seeks Sebi guidance on its proposed 'sell down' transaction for meeting the 25% minimum public shareholding requirement
- Nov: Sebi through a letter conveys Gillette India that its proposed transaction is not acceptable as means of achieving minimum public shareholding requirements
- Jan, 2013: Gillette India moves SAT, as its transaction is 'summarily rejected without assigning any reasons'
- Feb 22: SAT directs Sebi to pass a 'reasoned order' for rejecting Gillette's proposal
- Apr 15: Gillette again files application in SAT; the tribunal directs Sebi to give its decision in two weeks
