A Legal Analysis of SEBI’s Order under Regulation 11(5) of the Takeover Regulations, 2011
Date of Order: October 16, 2025
Passed by: Kamlesh C. Varshney, Whole Time Member, SEBI
Case Title: In the matter of Jyothy Labs Limited – Application by M.P. Ramachandran Family Trust I and II for Exemption under Regulation 11(5) of SEBI (SAST) Regulations, 2011
I. Introduction
In a recent order dated October 16, 2025, the Securities and Exchange Board of India (SEBI) granted an exemption to M.P. Ramachandran Family Trust I and M.P. Ramachandran Family Trust II from the obligation to make an open offer under Regulations 3 and 5 read with Regulation 4 of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SAST Regulations, 2011).
This exemption was sought in connection with the proposed transfer of shares and voting rights of Jyothy Labs Limited (“Target Company”) by its founding promoters Mr. M.P. Ramachandran and Mrs. M.G. Shanthakumari to the aforementioned family trusts.
The order provides a valuable case study on how succession planning through family trusts is treated under Indian takeover law and SEBI’s regulatory approach toward non-commercial intra-promoter transfers.
II. Factual Background
1. The Target Company
Jyothy Labs Limited, incorporated on January 15, 1992, is a listed FMCG company known for products such as Ujala, Henko, Margo, and Exo. Its equity shares are listed on both BSE and NSE.
As of June 30, 2025, the company’s paid-up equity share capital stood at ₹36.72 crore, divided into 36,72,14,511 shares of ₹1 each. The promoter group collectively held 62.89%, and the public held 37.11%.
2. Promoter Shareholding (Pre-Transaction)
| Promoter/Promoter Group | Shareholding (%) |
|---|---|
| M.G. Shanthakumari | 39.12% |
| M.P. Ramachandran | 1.75% |
| Other family members & entities (including Sahyadri Agencies Ltd. and Jaya Trust) | 22.02% |
| Total Promoter Holding | 62.89% |
3. Sahyadri Agencies Limited (SAL)
A key promoter entity, Sahyadri Agencies Limited (SAL), holds 3.95% in Jyothy Labs. Its shareholding is primarily owned by Mr. Ramachandran (99%), with other family members holding nominal shares.
The proposed trust structure also involves indirect transfer of control over SAL to the family trusts.
III. The Proposed Transaction
The proposed transaction involves both direct and indirect acquisition of shares and voting rights by the two family trusts. The mechanism is summarized below:
1. Direct Acquisition (by way of Gift)
| Transferor | Acquirer Trust | % of Jyothy Labs shares transferred | Mode |
|---|---|---|---|
| M.P. Ramachandran | Family Trust I | 1.75% | Gift |
| M.G. Shanthakumari | Family Trust II | 39.12% | Gift |
| Total | 40.87% | Gift |
2. Indirect Acquisition via Sahyadri Agencies Ltd.
| Transferor | Acquirer Trust | % of SAL shares transferred | Mode |
|---|---|---|---|
| M.P. Ramachandran | Family Trust I | 99% | Gift |
| M.G. Shanthakumari | Family Trust II | 0.143% | Gift |
This would effectively result in Family Trust I gaining indirect control over SAL, and thereby over 3.95% of Jyothy Labs’ shares held by SAL.
3. Structure of the Family Trusts
| Trust | Settlor(s) | Trustees | Beneficiaries |
|---|---|---|---|
| Family Trust I | Mr. M.P. Ramachandran & Mrs. Shanthakumari | Mrs. Jyothy Moothedath Ramachandran, Mrs. Deepthy Moothedath Ramachandran, and Mrs. Shanthakumari | Mrs. Jyothy & Mrs. Deepthy |
| Family Trust II | Mrs. M.G. Shanthakumari & Mr. Ramachandran | Mr. Ramachandran, Mrs. Jyothy, and Mrs. Deepthy | Mrs. Jyothy & Mrs. Deepthy |
Both trusts are irrevocable and discretionary, settled under the Indian Trusts Act, 1882, primarily for succession and estate planning.
IV. Regulatory Context
The SAST Regulations, 2011, require an acquirer to make an open offer when:
- They acquire 25% or more of the voting rights in a listed company (Regulation 3(1)), or
- They, while already holding 25% or more, acquire an additional 5% or more in a financial year (Regulation 3(2)), or
- They acquire control, directly or indirectly (Regulation 4).
However, Regulation 11(5) empowers SEBI to grant exemption from these open offer obligations under specific circumstances.
The applicants sought exemption under Regulation 11(5), invoking SEBI’s Master Circular No. SEBI/HO/CFD/PoD-1/P/CIR/2023/31 dated February 16, 2023, which lays down detailed guidelines for exemptions in inter se transfers and family trust transactions.
V. Grounds for Exemption
The Acquirer Trusts put forth the following principal arguments:
- Succession Planning Purpose:
The transfers are part of an intra-family estate and succession planning exercise intended to ensure smooth transfer of ownership to the next generation. - No Change in Control:
Trustees and beneficiaries are all existing promoters or their immediate family members. The transfer does not alter control or management. - Mirror Image of Promoter Holdings:
The trust structure merely mirrors existing promoter holdings, without any external involvement or commercial consideration. - No Public Impact:
There will be no impact on public shareholders, shareholding pattern, or minimum public shareholding (MPS) compliance. - Transparency and Enforceability:
Trustees are identifiable individuals. All SEBI laws remain enforceable against them personally. - Compliance Undertakings:
The applicants confirmed full compliance with the Chapter 8 guidelines of the SEBI Master Circular, including:- Annual confirmation and audit certification of compliance.
- Disclosure of any change in trustees/beneficiaries within 2 days.
- Non-transferability of beneficial interest.
- Distribution of assets only to beneficiaries or their heirs upon dissolution.
VI. SEBI’s Observations and Considerations
After examining the submissions, SEBI noted:
- The transaction triggers open offer obligations under Regulations 3(1), 3(2), and 5.
- However, the transaction is purely intra-promoter and non-commercial, aimed at succession planning.
- There is no change in control or management, and promoter group shareholding remains constant before and after the transaction.
- The transferors have been disclosed as promoters for over three years, fulfilling the eligibility condition in SEBI’s exemption guidelines.
- The trusts comply with all transparency and governance requirements under SEBI’s Master Circular.
VII. SEBI’s Decision
SEBI granted the requested exemption, allowing the proposed transactions without triggering an open offer, subject to the following conditions:
1. Compliance with Law
The acquisitions must comply with the Companies Act, 2013 and all other applicable laws.
2. Post-Acquisition Reporting
A report must be filed with SEBI within 21 days of the acquisition.
3. Truthful Disclosures
All facts, figures, and statements in the application must be true and accurate.
4. Ongoing Compliance
The trusts must continue to comply with:
- Undertakings and statements made in the application.
- Provisions of the SEBI Master Circular (Feb 16, 2023).
- Annual compliance confirmation and independent audit certification, to be filed with stock exchanges and SEBI.
5. Validity
The exemption is valid for one year from the date of the order. The acquisition must be completed within that period, failing which the exemption lapses.
6. Limited Scope
The exemption only pertains to open offer obligations under SAST Regulations and does not extend to:
- Disclosure obligations under Chapter V of SAST.
- Insider Trading Regulations.
- Listing and Disclosure Regulations (LODR).
VIII. Legal Significance and Implications
1. Recognition of Family Trusts in Securities Regulation
This order continues SEBI’s evolving jurisprudence of recognizing family trusts as legitimate vehicles for promoter succession and estate planning, following precedents like:
- Securities and Exchange Board of India v. NR Agarwal Family Trust (2023)
- Order in the matter of Asian Paints Family Trust (2022)
2. Clarity on “Control” and “Promoter Group”
By reaffirming that control remains unchanged when trustees and beneficiaries are within the promoter family, SEBI reinforces a pragmatic approach — balancing regulatory oversight with familial continuity.
3. Emphasis on Transparency
SEBI’s conditions on disclosure, audit, and annual compliance reporting underline its focus on transparency, ensuring that family trusts do not become opaque layers shielding control.
4. Policy Consistency
The order is consistent with SEBI’s Master Circular (February 16, 2023), which seeks to standardize treatment of intra-family transfers under the takeover code.
IX. Conclusion
The SEBI Exemption Order in the matter of Jyothy Labs Limited (October 16, 2025) is a textbook case of the regulator’s balanced and facilitative approach to intra-promoter restructurings.
By permitting the Ramachandran Family Trusts to consolidate promoter holdings for succession planning while maintaining stringent disclosure and compliance safeguards, SEBI demonstrates that family-driven corporate reorganizations can coexist with the principles of market transparency and investor protection.
🧾 Citation:
SEBI Order No.: WTM/KCV/CFD/11/2025-26
Title: In the matter of Jyothy Labs Limited – Exemption under Regulation 11(5), SAST Regulations, 2011
Date: October 16, 2025
Authority: Kamlesh C. Varshney, Whole Time Member, SEBI