Sebi exempts govt from making open offer in Allahabad Bank

Markets watchdog Sebi today exempted the government from making an open offer to the shareholders of Allahabad Bank following the proposed equity infusion that would hike its stake in the lender by more than five per cent.
The central government, a promoter of Allahabad Bank, has proposed to infuse capital worth Rs 690 crore in the lender against allotment of equity on preferential basis in favour of it.
The capital infusion is part of government's programme to shore up the bank's capital base for meeting Basel norms.
The government, presently, holds 61.38 per cent stake in the bank and the proposed allotment of 10,92,29,064 equity shares of Allahabad Bank would increase its shareholding by around 5.83 per cent to 67.21 per cent mandating an open offer under the Takeover Regulation.

The bank had filed their applications with the markets regulator to seek exemption on behalf of its promoter.
Subsequently, Sebi, in an order passed today, said there would be no change in the management control post equity infusion in the bank.

In addition, "such additional capital will help the bank to keep a safe buffer over and above the minimum norms of Basel III and would give additional leverage to raise further equity capital at a later date as and when the need arises.
...Capital adequacy of the bank is a requirement to protect its small customers as well as the public shareholders who have invested in its equity."

The regulator further said this was a 'fit' case to grant exemption under the Takeover Regulations to the government from the obligation to make an open offer with respect to its proposed increase of shares/voting rights in Allahabad Bank, pursuant to proposed preferential allotment of equity shares.
The exemption has been granted subject to the condition that the government or the bank would ensure compliance with the statements, disclosures and undertakings made with regard to the transactions, among others.
Under the Takeover norms, when entities who hold 25 per cent or more shareholding in a company acquire additional 5 per cent or more in that particular firm, in a financial year then they are required to make an open offer.

Earlier also, the government has been granted such exemptions in case of other state-run entities in similar circumstances.