Sebi grants exemption to Centre to raise stake in IOB

The decision is to support the decision of GoI to adequately capitalise the Bank to comply with Basel III norms

The Securities and Exchange Board of India (Sebi) has granted exemption to Indian Overseas Bank (IOB) from a regulation under the Takeover Regulations, in order to issue 55,57,14,797 equity shares through preferential allotment to the Government of India to raise around Rs 1,551 crore.

The proposed fund infusion is expected to increase the shareholding of Government of India in IOB with an additional 5.98 per cent during the Financial Year 2016-17. The proposed acquisition is on account of the Government of India's objective that all Public Sector Banks are adequately capitalised for ensuring compliance with BASEL III norms.

The infusion of additional capital will enable the lender to maintain a capital over and above the minimum requirement mandated under BASEL III norms and will also provide it with additional leverage for raising further equity capital at a later date.

"Accordingly, I am of the considered view that exemption as sought for in the Application made by the Target Company (IOB), be granted to the Proposed Acquirer/Promoter (Government of India), subject to certain conditions...," S Raman, Whole Time Member, Sebi in an order issued on Friday.

The Government of India, on July 19, has proposed an infusion of capital of Rs 3,101 crore into the Bank and 50 per cent of it, Rs 1,551 crore has to be infused immediately through a proposed preferential allotment of 55,57,14,797 equity shares in favour of the Government of India.

Remaining 50 per cent will be infused by the Government of India based on the performance of the Bank on various benchmark activities as envisaged by the Government of India, by the end of December 2016 or earlier.

The fund raising through preferential allotment must be completed at the earliest in order to improve CRAR as on March 31, 2017, factoring the effect of the proposed additional capital infusion by Government of India.

As the proposed infusion of funds by Government of India would increase their shareholding by more than 5 per cent during the Financial Year 2016-17, exemption is sought from the applicability of Regulation 3(2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

With this, the increase in equity shares would be 73.58 per cent to 79.56 per cent.

The public shareholding in the Bank shall be increased to 25 per cent within a maximum period of 12 months from the date of the proposed preferential allotment, in the manner specified by Sebi.