SEBI Approves New Shareholding Pattern For Gillette India

Ever since the SEBI came out with the minimum 25 per cent public holding regulation, companies initiated actions like open offers (if they opted for de-listing) or other ways to fall in line. While many came out with FPOs or tried private placements, some companies even tried new ways out like classifying some of their promoters as public. One such company was Gillette India (GIL).

Earlier, the company had classified one of its shareholders (Kolkata-based business house, Poddar Group) as a non-promoter. As a result of this, the regulator had imposed certain penalties GIL on grounds that this method of compliance was not acceptable. GIL had been locked in a dispute with the SEBI and its appellate tribunal regarding the shareholding structure for the last several months.

Now, the SEBI has allowed the company to re-classify the same entity as a public shareholder in order to become compliant with the minimum public shareholding rules.

According to the arrangement, the Poddar Group, which owns a 12.86 per cent share in the company, would dispose off a 6.86 per cent stake in GIL in order to be considered a public shareholder. The parent company (US based Procter & Gamble Co.) will sell a 0.90 per cent stake to pare down its overall stake to 75 per cent. The Poddar Group will terminate its shareholder agreement related to Gillette with P&G, and will also withdraw its nominees from the GIL board.

Apart from that, the SEBI also imposed certain other restrictions on the Poddar Group related to management appointment and special rights in connection with the company. The notification says that the group shall have no special rights in GIL through any formal or informal arrangements. Poddar Group entities shall also not hold any key managerial position in GIL.

Following this development, the shares of Gillette India surged significantly. The scrip is likely to remain in the positive zone in near term. However, most of the benefits are already discounted in the price, and hence, any fresh exposure to the counter should be avoided.