Sebi exempts govt from making open offer to IDBI Bank minority shareholders

The Securities and Exchange Board of India (Sebi) on Monday exempted the government of India from making an open offer to minority shareholders of IDBI Bank, a mandatory requirement unless given legal exemption, since a proposed capital infusion would breach the creeping acquisition limit of five per cent.

In November, the government had given an in-principle nod to convert Tier-I bonds held by it, amounting to Rs 2,130 crore, into 188 million equity shares.

After the said issue, the GoI shareholding would rise from 65.13 to 70.73 per cent. This proposed acquisition of shares would be in excess of the creeping limit of five per cent permitted in Regulation 3(2) of the Takeover Regulations. Unless the acquisition is exempted under Regulation 11, it would trigger a mandatory open offer obligation for GoI.

Rajeev Agarwal, wholetime member of Sebi, said: "I agree with the observations and recommendations of the Takeover Panel and consider (this) a fit case to grant exemption from the obligation to make an open offer."

The takeover panel had said capital adequacy of IDBI Bank was a key requirement to protect the interest of its customers and the public shareholders who'd invested in its capital. And, that GoI was agreeable to convert Tier-I bonds into equity shares of the bank, to enable the latter to meet the prudential norms set under Basel-I rules, as also to give ir room to grow its business.

The bonds were being converted at Rs.112.99 per equity share, in accordance with a Sebi pricing formula for preferential allotment. Considering all these aspects, the panel found the proposal in the interest of the public shareholders and other stakeholders of the bank and recommended grant of exemption.