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Tribunal ruling made SEBI stall Grasim open offer

Kripa Raman

MUMBAI, Nov. 20

IT is the Securities Appellate Tribunal order in the Gujarat Ambuja-ACC Ltd case that has prompted the Securities and Exchange Board of India to make a pre-emptive move putting on hold Grasim's open offer for 20 per cent stake in L&T, a SEBI official has conceded.

The issue therefore is whether there has been any change in management control in L&T, following Grasim's acquisition 10.05 per cent stake from the Reliance group in November last year. "And should this be established, the open offer price of Rs 190 per share of L&T would change as well; it would have to be based on the date on which the change in management control is established to have happened," said the official.

The Grasim case looked similar to that of Gujarat Ambuja and SEBI thought it best to stall the issue "beforehand," said the official.

Establishing whether there had been a change in management control had been made much clearer by the SAT order in the Gujarat Ambuja-ACC case, said the SEBI official.

The mere technical point that Grasim holds a less than 15 per cent stake is not sufficient to prove that Grasim has not been exercising influence over the management. In fact, the SAT order in the Gujarat Ambuja case quotes a research study: "In fact, if the shareholding is widely dispersed, even a fractional holding of equity can suffice to ensure control over the company."

The order then goes on to say: "Therefore, SEBI's finding that Ambujas with just 14.4 per cent shareholding, not in majority, is not in a position to exercise control over the company, by itself is not a conclusive factor in this regard."

Grasim today formally informed the stock exchanges of SEBI's advice to the company not to proceed with its open offer "since SEBI has decided to conduct investigation in terms of Chapter V of the SEBI (substantial acquisition of shares and takeover) regulations, on alleged violations with respect to the acquisition of 25,000,000 equity shares of paid-up capital and voting capital of L&T by the company in November 2001."

Grasim also said it had filed an appeal with SAT against the aforesaid communication and also applied to SAT "for suitable interim relief also."

Meanwhile, the Investor Grievances Forum, headed by Member of Parliament, Mr Kirit Somaiya, has demanded an investigation into why the letter stalling the open offer sent to Grasim's merchant banker was not made public till after 10 days (according to IGF).

IGF has asked SEBI to also "call for information/explanations from merchant bankers, Grasim and stock exchanges to find out who have purchased or sold shares of L&T during November 8-19, 2002 and why the above information was made known to the public so late."

SAT hearing appeal today

THE Securities Appellate Tribunal will hear on Thursday Grasim's appeal against SEBI's advice to the company to put its open offer for L&T on hold, it is learnt.

The company has asked for interim relief.

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