Securities and Exchange Board of India (SEBI) gave the green light to Sanjay Shah, promoter of mutual fund distributor Prudent Corporate Advisory Services, to gift some of his shares to the company’s employees as a token of appreciation.
According to a report in The Economic Times, Shah wanted to distribute Rs 33 crore worth of shares among 650 employees, which also included staff members engaged at his home.
He intends to give 1,75,000 shares, representing 0.4 per cent of his stake in Prudent to his employees to celebrate 25 years in business. All the recipients have worked with him and Prudent for three years.
Prudent Corporate Advisory Services Ltd shares were up 1.45 per cent at Rs 1,897.15 in Wednesday's trade. Turnover on the counter came at Rs 31.88 lakh, commanding a market capitalisation (m-cap) of Rs 7,855.47 crore. Last checked on BSE, there were 3,592 buy orders against sell orders of 919 shares.
Shah told the financial daily that he wanted to surprise the employees and make them feel like valued members of the company.
However, the recipients of the gift had to be classified as members belonging to the promoter group as per the securities guidelines in India. However, Shah was not keen on that as it would affect the company’s promoter holding structure and control dynamics.
As per the report Shah approached SEBI seeking exemption citing that reclassification of the promoter group would dilute the value of the gesture and discourage promoters from rewarding employees from personal wealth. He said that the recipients did not meet promoter criteria and the shares were not meant for Prudent’s key managerial personnel. He also said that the situation would mislead investors regarding promoter holding.
SEBI, after hearing the arguments, exempted Shah from the regulations. It also said that the exemption is specific to this case and should not be treated as precedent.
Shah holds about 42 per cent in Prudent, valued at Rs 7,797 crore, while his two daughters and family members own 13 per cent.