Sebi grants open offer exemption to Jyothy Labs promoter family trusts for succession planning

Sebi grants open offer exemption to Jyothy Labs promoter family trusts for succession plan

The Securities and Exchange Board of India (Sebi) has granted an exemption to MP Ramachandran family trusts, the promoter group of Jyothi Labs, from making an open offer under takeover regulations in connection with the proposed transfer of promoter holdings in Jyothy Labs Limited as a part of succession planning.

The exemption, granted under the Sebi (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, allows the family trusts of Jyothy Labs’ promoter group, MP Ramachandran and his spouse, M.G. Shanthakumari, to acquire shares and voting rights in the company without triggering an open offer requirement.

According to the Sebi order issued by Whole Time Member Kamlesh Chandra Varshney, the transfers are part of an internal estate and succession planning exercise and will not lead to any change in control or management of the FMCG company.

Under the proposed transactions, Ramachandran will transfer 1.75 percent of Jyothy Labs’ shares to MP Ramachandran Family Trust I, while Shanthakumari will transfer 39.12 percent to M.P. Ramachandran Family Trust II, both by way of gifts. In addition, the trusts will indirectly acquire control over Sahyadri Agencies Ltd, a promoter group entity holding 3.95 percent in the company.

Sebi noted that following the transfers, the overall promoter group shareholding in Jyothy Labs will remain unchanged at 62.89 percent, while public shareholding will continue at 37.11 percent, ensuring compliance with minimum public shareholding norms.

The regulator said that there will be no change in control of the target company pursuant to the proposed acquisitions as circular dated February 16, 2023, which allows exemptions for family trusts created for legitimate succession planning.

Whole Time Member, Kamlesh Chandra Varshney, noted in his order, “The proposed acquisitions are for estate and succession planning exercise intended for efficient succession planning for the next generation. The proposed acquisitions would bea  non-commercial transaction which would not affect or prejudice the interests of the public shareholders of the Target Company in any manner”.

The trusts are also required to provide annual compliance certificates, maintain transparency in any future changes to trustees or beneficiaries, and ensure that the trust deeds remain consistent with Sebi’s conditions.

Sebis's exemption order further stated, “The Proposed Acquirers shall also ensure that the covenants in the Trust Deeds are not contrary to the above conditions. In such a case, the Trust Deeds shall be suitably modified and expeditiously reported to Sebi”.

The exemption is valid for one year from the date of the order. The acquirer must complete the transactions within this period and file a report with Sebi within 21 days of completion.

SEBI clarified that the exemption is limited to open offer obligations and does not absolve the acquirers from complying with disclosure requirements, insider trading regulations, or listing obligations.