 "Sebi exempts govt from Dena Bank open offer")
Market regulator Sebi today exempted the central government from making an open offer following its decision to infuse capital in Dena Bank that will increase its stake in the state-owned lender.
The regulator "granted exemption to the Government of India, from complying with the requirements...Of the Sebi (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 with respect to its proposed acquisition of 11.85 crore shares by way of preferential allotment by Dena Bank."
As per the rules, when entities holding 25% or more stake in a company acquire additional 5% or more stake in the firm, they are required to make an open offer so as to provide an exit opportunity to the public shareholders.
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The government, in October 2013, conveyed its decision to infuse Rs 700 crore capital in the bank against the allotment of equity on preferential basis.
The Bank's board in November approved raising of equity capital to the extent of Rs 700 crore by way of issue of equity shares in favour of the government on preferential basis subject to the approval of the RBI, the shareholders and other statutory authorities.
A meeting has been convened on December 24 for obtaining the shareholders' approval for the proposed allotment.
The bank has proposed to allot 11,85,83,771 fresh equity shares to the government on a preferential basis.
The allotment will increase the government's shareholding in the bank from 55.24% to 66.57%. This would increase government's shareholding/voting rights by around 11.33% triggering the provisions of the Takeover Regulations.
Therefore, the bank on behalf of government has sought exemption from the applicability of the Takeover Regulation.
In its submission to Sebi, Dena Bank has informed about the government's desires that all public sector banks should maintain a minimum of 8% Tier I Capital to Risk-weighted Assets Ratio (CRAR).
The bank further said that "it has not achieved the desired level of CRAR and that the infusion of capital by government is made in order to enable the bank to comply with the 'Basel III' requirements".
The regulator said that pursuant to the proposed increase in the shareholding of the government in Dena bank, the minimum public holding as stipulated under Sebi's norm would be maintained, as the public holding would then be around 33.43%.
"Further, there would be no change in the management control in the Target Company (Dena Bank," Sebi said.
Consequently, Sebi said this is "a fit case to grant exemption" under Takeover Regulations to "the government from the obligation to make an open offer".