 "IDFC Bank")
IDFC First Bank on Monday informed the exchanges that its shareholders have rejected a special resolution seeking approval for US-based private equity giant Warburg Pincus LLC’s affiliate Currant Sea Investments B.V. to nominate a non-retiring non-executive director to the bank’s board. The special resolution received 64.1 per cent of votes, falling short of the required 75 per cent threshold needed for it to pass.
The private sector lender had last month announced that Warburg Pincus LLC and the Abu Dhabi Investment Authority (ADIA) had collectively invest ₹7,500 crore in the bank through a preferential equity issue, aimed at supporting its next phase of growth.
Warburg Pincus, through Currant Sea Investments B.V., is investing ₹4,876 crore while ADIA is putting in ₹2,624 crore via its wholly owned subsidiary Platinum Invictus B 2025 RSC.
Consequently, the bank’s board approved issuance of 1.25 billion fully paid-up compulsorily convertible cumulative preference shares (CCPS), of which 812.69 million CCPS are to be allotted to Currant Sea Investments B.V., and 437.18 million CCPS to Platinum Invictus B 2025 RSC at ₹60 each.
Currant Sea will hold 9.48 per cent and Platinum Invictus 5.1 per cent of the bank on a post-money basis on conversion of CCPS.
Following this, the bank sought shareholders’ approval through postal ballot to reclassify authorised share capital of the bank, and amend the capital clause of the memorandum of association of the lender. Additionally, it sought shareholders’ nod to issue and allot CCPS of ₹7,500 crore on preferential basis, amend articles of association of the bank, and provide a right to “Currant Sea Investments B.V.” to nominate one non-retiring non-executive director.
While the first two resolutions passed the shareholders’ muster, securing 99.61 per cent and 99.18 per cent votes, respectively, the third resolution did not pass through.
In the special resolution concerning approval to nominate a non-executive director to the bank’s board, 76.08 per cent of institutional investors and 27.53 per cent of non-institutional (retail) investors participated. Only 49 per cent of the votes of non-institutional investors were in favour of the resolution while 51 per cent was against it. In case of retail investors, over 98 per cent of the votes were in favour of the resolution while a little over 1 per cent of the votes were against it.
Overall, 64.10 per cent of the total votes were in favour of the resolution, falling short of the required 75 per cent, while 35.90 per cent were against it.
Proxy advisory firm Institutional Investor Advisory Services (IiAS) had recommended voting “against” the resolution.
“There is no minimum shareholding threshold; even at below 10 per cent shareholding, Currant Sea Investments B.V. has a right to a board seat. We do not support board nomination rights without an embedded minimum shareholding threshold of at least 10 per cent,” IiAS had said.
“We also do not support committee nomination rights since the determination of committee composition is the board’s prerogative, and must be decided by the board independently. We do not support the resolution. IiAS recommends voting ‘against’ the resolution,” it had further said.
In response to IiAS, the bank had stated: “Currant Sea Investments B.V. has the right to appoint one nominee non-executive director on the board of directors of the bank. This proposal has been accepted by the board of the bank. The appointment of the investor director shall be subject to: such a person satisfying the ‘fit and proper’ criteria and other requirements/conditions as may be specified by the Reserve Bank of India (RBI), and bank’s nomination and remuneration committee (NRC); approval by the bank’s NRC; and approval of the board and the shareholders of the bank (sic).”
IDFC First Bank has raised equity capital six times since 2020. With the current equity fundraise, the bank has raised over ₹20,000 crore in the last five years by issuing 3.7 billion shares, leading to an equity dilution of 40 per cent.
Shares of IDFC First Bank closed at ₹68.65 on the BSE on Monday, down 0.87 per cent from the previous day’s close.
Another private sector lender, Yes Bank had recently announced that Japan-based Sumitomo Mitsui Banking Corporation (SMBC) will take a 20 per cent stake in the bank for ₹13,482 crore. Consequently, SMBC will become the largest shareholder in the bank, and will have the right to nominate two board members.
