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The Securities and Exchange Board of India (Sebi) has exempted the central government from making an open offer for its proposed increase of stake in city-based Indian Overseas Bank (IOB). The government is planning to raise its stake in the bank five per cent by infusing about Rs 1,200 crore.
The bank’s authorised capital is Rs 3,000 crore, while its paid-up capital is Rs 924.10 crore. The government holds 73.8 per cent of the bank’s equity share capital. It wants all public sector banks to maintain a tier-I capital to risk-weighted assets ratio (CRAR) of at least eight per cent. As of March 31, 2013, IOB’s tier-I CRAR, under Basel-II norms, was 7.8 per cent; overall CRAR, according to Basel-II norms, was 11.85 per cent.
On September 30, the bank’s tier-I CRAR, according to Basel-III norms, was 7.02 per cent, while total CRAR was 10.66 per cent.
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On October 22 this year, the Ministry of Finance said the Centre would infuse Rs 1,200 crore capital in IOB in return for preferential equity. After that, the Centre’s stake will rise five per cent to 79.01 per cent. It had asked IOB to seek an exemption from Sebi from the obligation of making an open offer, under the takeover regulations.
On November 11, the IOB board approved raising additional equity of Rs 1,200 crore by issuing equity shares in favour of the Union government, on a preferential basis. To improve CRAR by March 31, 2014, the entire process of raising capital must be completed by December 30 this year.
On Wednesday, Prashant Saran, whole-time member of Sebi, said he granted exemption to the government from complying with the requirements of Regulation 3(2) of the Sebi (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, with respect to its proposed acquisition of shares in IOB. The exemption is subject to the condition that the proposed acquisition is in accordance with relevant provisions of the Companies Act and that the Centre and the bank ensure compliance with the statements, disclosures and undertakings in the application.
The exemption was limited to the requirement of making an open offer under regulation 3(2) of the takeover regulations
