Check violation of public holding norm: SAT to Sebi

Reserves judgment in Gillette India case

The Securities Appellate Tribunal (SAT) today asked the Securities and Exchange Board of India (Sebi) to check whether certain companies had violated the minimum public shareholding norms.

While hearing a matter between Gillette India and Sebi today, the tribunal said the securities market regulator shouldn’t just contemplate action against such companies, but also think of ways to address the issue.

Gillette India had moved SAT after Sebi had rejected its three-step plan to meet the 25 per cent public shareholding requirement. After hearing the arguments of Gillette’s and Sebi’s counsels, SAT member Jog Singh decided to reserve the tribunal’s judgment.

Currently, promoter holding in Gillette India stands at 88.76 per cent, of which Procter & Gamble (P&G) owns 76 per cent; the rest is held by the Poddar Group, its Indian promoter.

Gillette had proposed Poddar Group conduct transfer of four per cent holding to P&G at a premium of 25 per cent; the premium would be paid to Poddar Group for relinquishing control. Subsequently, the shareholder agreement between P&G and Poddar Group would be terminated, with the latter giving up all control and management rights in the company. Finally, P&G would sell about five per cent holding in Gillette India to public shareholders, through an offer for sale.

Appearing for Sebi, advocate J J Bhatt told the tribunal the regulator was apprehensive of accepting Gillette’s proposal, as under this, the public wouldn’t have access to 25 per cent holding. He added the proposal was aimed at circumventing the public shareholding norm. “Gillette could have sold some shares and Poddar could have sold some shares. The intent seems to be to go around the guidelines,” he said.

Gillette’s counsel, Somasekhar Sundaresan, told the tribunal Sebi was discriminating, as the regulator seemed to have no problem with a few other companies that had reclassified promoters as non-promoters, to meet the public holding norm. He cited the examples of Gokaldas Exports, Capital First (formerly known as Future Capital) and Balmer Lawrie.

Following this, SAT member Jog Singh asked the Sebi counsel to look into other cases in which entities were reclassified as public shareholders.
THE STORY SO FAR

• Sebi had rejected Gillette’s proposal to meet 25% public holding norm
• The Sebi counsel said the proposal was aimed at circumventing the norm
• Gillette’s counsel told SAT Sebi’s action was discriminatory
• Sebi told to look into cases in which entities were reclassified as public shareholders