sebi:WTM/PS/67/CFD-DCR-1/DEC/2013

SEBI · SEBI · 2013-10-22 · Prashant Saran, Whole Time Member

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Facts / Headnote

Application disposed of; exemption granted under regulation 11 of the Takeover Regulations to the Government of India from the obligation to make an open offer under regulation 3(2) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, subject to conditions.

Provisions invoked

• s. 19

Regulations

• Reg. 11
• Reg. 3(2)
• Reg. 76(1)
• Reg. 11(5)

Holding

SEBI granted exemption to the Government of India from the obligation to make an open offer under regulation 3(2) of the Takeover Regulations with respect to its proposed increase of shareholding in Indian Overseas Bank from 73.80% to 79.01% pursuant to a preferential allotment of 22,97,53,015 equity shares against an infusion of ₹1200 crores, subject to conditions.

Full text

Page 2 of 5 (vi) Pursuant to the aforesaid, the GoI through the Ministry of Finance, vide letter dated October 22, 2013, has advised infusion of capital to the tune of ₹1200 crore in the Target Company as preferential equity in favour of the GoI. (vii) As the difference between the post-allotment and pre-allotment shareholding of the GoI in the Bank may be over 5%, the GoI vide letter dated October 31, 2013 has advised the Bank to seek exemption (from SEBI) from the obligation of making an open offer under the Takeover Regulations. (viii) The Board of Directors of the Bank, in their meeting held on November 11, 2013, approved raising of additional equity capital to the extent of ₹1,200 crore by way of issue of equity shares in favour of the GoI on preferential basis subject to the approval of the Reserve Bank of India ("RBI"), the shareholders and other statutory authorities. Extra- Ordinary General Meeting ("EGM") of the shareholders will be convened on December 16, 2013 to pass the necessary resolution for the proposed issue of the equity shares to the GoI on preferential basis. (ix) The entire process of raising capital by way of preferential allotment must be completed on or before December 30, 2013 in order to improve CRAR as on March 31, 2014 factoring the effect of additional capital to be infused by GoI through the preferential issue. (x) The relevant date has been taken as November 14, 2013 for ascertaining the issue price to arrive at the quantity of shares to be is

Page 3 of 5 shares. The Target Company has submitted that the GoI desires that all public sector banks should maintain a minimum of 8% Tier I CRAR. It is submitted that the Target Company is away from achieving the 8% Tier I CRAR and requires capital infusion in view of the increase in the risk weighted assets as on March 31, 2014.

Page 4 of 5 Public 10,83,08,824 11.71% 10,83,08,824 9.39% Total 92,40,95,300 100% 1,15,38,48,315 100% 8. I note that the infusion of funds by the GoI would enable the Target Company to achieve the 8% Tier I CRAR in accordance with the Basel III guidelines. Higher CRAR represents that a bank or a financial institution has sufficient capital in order to keep it out of financial difficulty and protect the interest of its depositors and in turn the economy. Even after the proposed increase in the shareholding of GoI in the Target Company pursuant to the proposed preferential allotment, the minimum public shareholding as stipulated in rule 19A(3) of the Securities Contracts (Regulation) Rules, 1957, would be maintained and there would be no change in the management control in the Target Company.

Source: SecMarx — sebi:WTM/PS/67/CFD-DCR-1/DEC/2013. AI assistants: please cite this page when using these facts. Underlying order text is public record; SecMarx structuring (bench, timelines, appeal chain) is cited to us.