Gillette India, which has been locked in a tussle with the Securities and Exchange Board of India (Sebi) over the manner in which it intends to comply with the minimum public shareholding norms, has got a temporary relief from the Securities Appellate Tribunal (SAT).
On Thursday, the tribunal, while hearing an appeal filed by the MNC, directed Sebi not to take any enforcement action till the matter is heard and disposed. The matter will be heard on June 12 even though the deadline for complying with the shareholding norms expires on June 3.
The SAT has also asked Sebi to file a reply within 10 days, while suggesting that the regulator “might grant them approval with minor modifications”. “Respondent (Sebi) to file a short reply within 10 days... Till then Sebi shall not take any enforcement action,” said presiding office Jog Singh.
Promoter groups, which include P&G, currently hold 88.76% in Gillette India. The company has proposed a three-stage plan to bring down the promoter holding to 75%. In the first stage, the Indian promoters would transfer 4% stake to P&G at the permissible 25% premium while giving up control. The company is of the view that by giving up this control, the Indian promoters should be reclassified as public shareholders. In the final stage P&G will sell 4.9% through OFS. This is being done to avoid a sudden overhang of equity on the stock.
The market regulator is not comfortable with this approach since the promoters are first doing an inter-se transfer and then selling the residual stake in the open market. Somasekhar Sundaresan, while appearing for Gillette, said that the approach involves one of the promoter entities giving up control while losing a lot of statutory rights and so the essence of the law is being followed in both, letter and spirit.