Sebi exempts GMR Infra's promoters from making open offer

Market regulator Sebi today exempted the promoters of GMR Infrastructure from obligation of making an open offer pursuant to a proposed transfer of the ownership of the company's holding company to five family trusts.

The proposed transaction involves transfer of 100 percent stake in GMR Holdings Pvt Ltd (GHPL) -- the main promoter entity of GMR Infra -- to five family trusts by way of gift from group patriarch G M Rao and his wife G Varalakshmi.

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As a result of change in the ownership pattern of GHPL, the five family trust would indirectly acquire 70.3 percent stake in listed firm GMR Infra. Currently, GHPL owns 70.3 percent stake in GMR Infra, while all promoters together own 71.43 percent. Besides GHPL, the current promoter entities also include four trusts, a few group firms and individual promoter family members.

After looking into a plea by G M Rao and others for an exemption from open offer, Sebi said that "there would be no change either in the shareholding of GHPL in the Target Company (GMR Infra) or in the shareholding pattern of the promoter and promoter group in the Target Company". "It is only in the manner in which shares of GHPL (a promoter entity) are held which would change pursuant to the proposed transfer of shares of GHPL held by Mallikarjuna Rao and G Varalakshmi to the afore-mentioned Trusts (the Acquirers)," Sebi said, while granting the exemption.

The Securities and Exchange Board of India (Sebi) rules require a mandatory open offer for minority shareholders in the event of any major change in the promoter holding of a listed company, including in the wake of any direct or indirect acquisition of 25 percent of above stake.

Such open offers are required for acquisition of up to 26 percent stake from public shareholders. In this case, Sebi however said "there would be no change in the shareholding/voting rights of the public shareholders and that the proposed transaction would not in any manner affect their interests."

Consequently, Sebi said "acquirers could be exempted from the open offer obligations mandated under ...the Takeover Regulations in respect of their proposed indirect acquisition of shares/voting rights of the target company."