Sebi exempts Bandhan Bank from 1-year lock-in period on promoter shares

Bandhan Bank's capital adequacy ratio is in excess of 30%, one of the highest in the industry

Bandhan Bank on Friday received exemption from the Securities and Exchange Board of India (Sebi) on one-year lock-in period for selling shares by promotors. This will enable the bank to comply with the Reserve Bank of India's (RBI's) licensing guidelines for new private sector banks. Effectively, this entails that Bandhan Bank can now sell promoters’ shares before March 2019.

Last month, as a penalty for not complying with the norm of bringing down promoters’ shareholding to 40 per cent within three years of operations, the RBI had withdrawn the “general” permission given to Bandhan Bank to open new branches and had frozen the remuneration of its managing director (MD) and chief executive officer (CEO) at the existing level.

However, the bank was allowed to open branches after seeking permission from the RBI.   The Sebi regulation of mandatory one-year lock-in period after the IPO was coming in the way of reducing promoters’ stake, which is currently 82.28 per cent in Bandhan Bank. 

Earlier, Bandhan had spelt out broad options for reducing promoters’ stake, including buyouts in the MSME, housing finance and MFI space, foray into new business lines like mutual fund and insurance at the holding company level, and change in structure of holding company. The option of secondary sale of shares was also listed. While change in the holding company structure would require RBI's permission, the secondary sale of shares would accrue excess capital. 

Bandhan Bank’s capital adequacy ratio is in excess of 30 per cent, one of the highest in the industry. Further, entering new businesses at the holding company level might also require selling of shares in the holding company, which was so long barred due to Sebi norms.  

According to analysts, apart from the options earlier listed by Bandhan Bank, it now has the additional option of direct sale of promoters’ stake.

“Earlier, some of the options before Bandhan Bank were either M&A or raising more capital. Now it has one more route of direct sale of promoters’ share,” according to Karthik Srinivasan, senior vice-president of rating agency Icra. 

“With Sebi's exemption, things will move faster. Else, it would have remained as a hangover till March 2019. There will be interest to buy bank shares after the substantial correction in price. The promoting entity has an option to sell part of holding directly in market (4-5 per cent). They may or may not issue fresh capital as capital base is already high. They may also look at acquisition opportunities gradually as they identify some good deals,” said Kajal Gandhi, Research Analyst, ICICI Securities Limited.    At present, Bandhan Financial Services is the 100 per cent owner of Bandhan Financial Holdings, a non-operating financial holding company. C S Ghosh, MD and CEO of the bank, could not be reached for comment.