order - SEBI

WTM/PS/77/CFD-DCR-1/FEB/2014
SECURITIES AND EXCHANGE BOARD OF INDIA
ORDER
In the matter of proposed acquisition of equity shares of Vijaya Bank - Application filed
under regulation 11(1) of the SEBI (Substantial Acquisition of Shares and Takeovers)
Regulations, 2011
1.
Vijaya Bank (hereinafter referred to as "the Target Company" or "the Bank") is a public
sector bank, having its Head Office at 41/2, M. G. Road, Bangalore - 560 001. The shares of the
Bank are listed on the Bombay Stock Exchange Limited ("BSE"), the National Stock Exchange
of India Limited ("NSE") and the Bangalore Stock Exchange Limited ("BgSE").
2.
The Target Company filed an application dated January 20, 2014 with the Securities and
Exchange Board of India (hereinafter referred to as "the SEBI"), on behalf of its promoter, the
Government of India (hereinafter referred to as "the GoI"), under regulation 11(1) of the SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (hereinafter referred to as
"the Takeover Regulations"), seeking exemption for the GoI from the applicability of regulation
3(2) of the Takeover Regulations in respect of its proposed acquisition of 30,46,45,849 shares
through conversion of
[120 crore PNCPS of
a)
1200 crore Perpetual Non-Cumulative Preference Shares ("PNCPS")
10/- each]. The application inter alia stated the following :
The authorised capital of the Bank is
31, 2013 was
3,000 crore and the paid-up capital as on March
1695.54 crore consisting of equity share capital of
preference share capital of
5,89,34,464 equity shares of
495.54 crore and
1200 crore. Further, the Bank has issued and allotted
10/- each at a premium of
32.42/- per share on
preferential basis to the GoI during December 2013.
b)
Presently, the paid up capital of the Bank is
capital of
shares of
c)
1754.47 crore consisting of equity share
554.47 crore and preference share capital of
1200 crore. The preference
1200 crore are held by the GoI.
The GoI is holding 33,16,01,200 shares i.e. 59.80% of the equity share capital of the
Bank.
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d)
The Bank vide letter dated May 24, 2013, inter alia requested the GoI for conversion of
PNCPS of
1200 crore into equity shares to improve Common Equity Tier - I of the
Bank to meet the requirement under Basel-III and also to increase the holding of GOI
to approximately 68% from the present level of 55.04%. The same, according, to the
Bank, was made considering that the conversion of PNCPS and consequent increase in
the holding of GoI shall give the Bank headroom for further disinvestment at the
appropriate time.
e)
Considering such request of the Bank, the GOI through the Ministry of Finance, vide
letter dated January 06, 2014 has advised their decision to convert the existing PNCPS
held by GoI to the tune of
f)
1200 crore into equity shares of the Bank, in favour of GoI.
Pursuant to the same, the Board of Directors of the Bank, in their meeting held on
January 17, 2014, approved conversion of the existing PNCPS to the tune of
1200
crore into Equity Shares of the Bank subject to the approval of the Reserve Bank of
India ("RBI"), the shareholders and other statutory authorities. An Extra-Ordinary
General Meeting ("EGM") of the shareholders is scheduled to be convened on February
19, 2014 to pass the necessary resolution for the proposed conversion of PNCPS into
equity shares.
g)
The GoI in its afore-mentioned letter has advised that the entire process be completed in
the financial year 2013-2014.
h)
The 'Relevant Date' is January 20, 2014 for ascertaining the issue price to arrive at the
quantity of shares to be issued pursuant to conversion of PNCPS. The issue price has
been fixed at
39.39/- per equity share, which is calculated as per regulation 76(1) of the
SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 ("the ICDR
Regulations"). Based on the issue price and the quantum of PNCPS due for conversion,
the total number of shares that would be offered to GoI is 30,46,45,849 equity shares.
Accordingly, post the conversion, the GoI would be holding 63,62,47,049 equity shares
(i.e. 74.06%).
i)
The proposed conversion of PNCPS into equity shares would not have any change in
the control in the management of the Bank.
j)
As the proposed conversion of PNCPS into equity shares would increase the
shareholding of GoI by 14.26% (which is more than 5% in a financial year) during the
financial year 2013-2014, exemption is sought from the applicability of regulation 3(2) of
the Takeover Regulations.
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3.
I have considered the application made by the Bank on behalf of the GoI, the documents
enclosed thereto and other material available on record. The GoI (a shareholder of the Target
Company under the category 'Promoter and Promoter Group'), which is the proposed acquirer, presently
holds 33,16,01,200 shares in the Bank, which constitutes 59.80% of the total number
(55,44,73,458 shares) of equity shares of the Bank.
4.
I note from the letter dated January 06, 2014 (letter from the Ministry of Finance, GoI to the
Target Company) that the GoI has conveyed its approval for conversion of PNCPS held by it in the
Bank to the tune of
1200 crores into equity share in favour of GoI, subject to the approval of
shareholders, SEBI and other authorities. The Board of Directors of the Bank, in their meeting
held on January 17, 2014, have approved the proposed conversion of the existing PNCPS to the
tune of
1200 crore into Equity Shares of the Bank subject to the approval of the RBI, the
shareholders and other statutory authorities. An Extra-Ordinary General Meeting ("EGM") of
the shareholders has been convened on February 19, 2014 to pass the necessary resolution for
the proposed conversion of PNCPS into equity shares.
5.
I note that the Bank has submitted that the issue price has been fixed at
equity share of
39.39/- per
10/- each as per regulation 76(1) of the ICDR Regulations, taking into
consideration "January 20, 2014" as the Relevant Date. Accordingly, the Target Company has
proposed to allot 30,46,45,849 equity shares to the GoI pursuant to the conversion of PNCPS.
The proposed allotment of 30,46,45,849 equity shares of the Target Company to the GoI would
increase the shareholding of the GoI (in the Target Company) from 59.80% to 74.06%. This
resultant increase in the shareholding/voting rights of the GoI would be around 14.26%, which
increase mandates an open offer under the provisions of regulation 3(2) of the Takeover
Regulations, unless the same is exempted under regulation 11 of the Takeover Regulations.
Accordingly, the Target Company on behalf of GoI, has sought exemption from the applicability
of the said regulation.
6.
The shareholding pattern in the Target Company as mentioned in the application and the
shareholding pattern post the proposed preferential allotment to the GoI, is given in the
following table :
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Category
Promoter
Group
(GoI)
FIs/banks
FIIs/NRIs/OCB
Public
Total
7.
Shareholding pattern in the Target Company
Pre-conversion
Post issue of equity on conversion of
PNCPS
No. of shares
Percentage
No. of shares
Percentage
33,16,01,200
59.80%
63,62,47,049
74.06%
6,80,73,116
1,72,87,776
13,75,11,366
55,44,73,458
12.27%
3.13%
24.80%
100%
6,80,73,116
1,72,87,776
13,75,11,366
85,91,19,307
7.92%
2.01%
16.01%
100%
I note that the conversion of PNCPS in favour of GoI would enable the Target Company
to achieve the Tier I CRAR in accordance with the Basel III guidelines. I also note that even after
the proposed increase in the shareholding of GoI in the Target Company pursuant to the
proposed conversion of PNCPS, the minimum public shareholding as stipulated in rule 19A(3) of
the Securities Contracts (Regulation) Rules, 1957, would be maintained. Further, there would not
be any change in the management control in the Target Company pursuant to the proposed
transaction.
8.
Considering the proposed conversion of PNCPS into equity shares in favour of GoI in
the light of the reasons stated by the Target Company and the observations made above, I am of
the considered view that this is a fit case to grant exemption under regulation 11 of the Takeover
Regulations to the GoI from the obligation to make an open offer under regulation 3(2) of the
Takeover Regulations with respect to its proposed increase of shares/voting rights from 59.80%
to 74.06%, pursuant to conversion of PNCPS into 30,46,45,849 equity shares to the GoI.
9.
In view of the foregoing, I, in exercise of the powers conferred upon me under section 19
of the Securities and Exchange Board of India Act, 1992 read with regulation 11(5) of the SEBI
(Substantial Acquisition of Shares and Takeovers) Regulations, 2011, hereby grant exemption to
the proposed acquirer, the Government of India, from complying with the requirements of
regulation 3(2) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
with respect to its proposed acquisition of 30,46,45,849 shares by way of conversion of PNCPS
(of
1200 crore) by the Target Company i.e., Vijaya Bank, which may increase the
shareholding/voting rights of the Government of India in the Target Company from 59.80% to
74.06%. The exemption is granted subject to the following conditions :
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(i)
The proposed acquisition shall be in accordance with the relevant provisions of the
Companies Act, 1956, the Companies Act, 2013, the Banking Companies (Acquisition
and Transfer of Undertakings) Act, 1980, the SEBI (Issue of Capital and Disclosure
Requirements) Regulations, 2009, the Listing Agreement and all other applicable laws.
(ii)
The GoI/Target Company shall ensure compliance with the statements, disclosures and
undertakings made in the application/other correspondence.
(iii)
The exemption is only limited to the requirements of making open offer under regulation
3(2) of the Takeover Regulations, 2011 and shall not extend to other obligations (e.g.
disclosure requirements under Chapter V of the said Takeover Regulations, Listing Agreement or any
other law) of the GoI/Target Company.
10.
The application dated January 21, 2014 filed by the Government of India through the
Vijaya Bank, is accordingly disposed off.
PRASHANT SARAN
WHOLE TIME MEMBER
SECURITIES AND EXCHANGE BOARD OF INDIA
Date : February 17, 2014
Place : Mumbai
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