Govt’s Rs1,200-cr investment to raise stake in Vijaya Bank to 74.06% gets SEBI nod

The Securities and Exchange Board of India has exempted the government of India from complying with the takeover regulations in its Rs1,200-cr investment in Vijay Bank to increase its shareholding/voting rights in the public sector bank to 74.06 per cent from the existing 59.80 per cent.

The acquisition is made through conversion of perpetual non-cumulative preference shares (PNCPS) worth Rs1,200 crore.

Vijaya Bank had an authorised capital of Rs3,000 crore and a paid-up capital of Rs1,695.54 crore as of 31 March 2013, consisting of equity share capital of Rs495.54 crore and preference share capital of Rs1,200 crore.

Further, the bank has issued and allotted 5,89,34,464 equity shares of Rs10 each at a premium of Rs32.42 per share on preferential basis to the GoI during December 2013.

At present, the paid-up capital of the bank is Rs1,754.47 crore consisting of equity share capital of Rs554.47 crore and preference share capital of Rs1,200 crore. The preference shares of Rs1,200 crore are held by the government.

The government held 33,16,01,200 shares, ie, 59.80 per cent of the equity share capital of the bank before the issue.

Vijaya Bank has sought conversion of PNCPS of Rs1,200 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 government to approximately 68 per cent from the present level of 55.04 per cent.

Ths according, to the bank, was done considering that the conversion of PNCPS and consequent increase in the holding of GoI would give the bank headroom for further disinvestment at the appropriate time.

The board of directors of Vijaya Bank, at its meeting held on 17 January 2014, approved conversion of the existing PNCPS to the tune of Rs1,200 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 extraordinary general meeting (EGM) of the shareholders is scheduled to be convened on 19 February 2014 to pass the necessary resolution for the proposed conversion of PNCPS into equity shares.

The government wanted the entire process to be completed in the financial year 2013-2014.

Accordingly, Vijaya Bank has fixed the issue price at Rs39.39 per equity share. 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.

Post conversion, the government would be holding 63,62,47,049 equity shares or 74.06 per cent of equity stake in Vijaya Bank.

The proposed conversion of PNCPS into equity shares would not result in change in the management of the bank.

As the proposed conversion of PNCPS into equity shares would increase the shareholding of the government by 14.26 per cent (which is more than 5 per cent in a financial year) during the financial year 2013-2014, exemption is sought from the applicability of regulation 3(2) of the takeover regulations.

SEBI said the exemption is subject to the provision that the proposed acquisition is 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.

The exemption is limited to the requirements of making an open offer under regulation of the takeover regulations and will not extend to other obligations such as disclosure requirements under the takeover regulations, listing agreement or any other law, SEBI said.

After the issue, the promoter group (the government) will hold 63,62,47,049 shares (or 74.06 per cent) of Vijaya Bank against 33,16,01,200 shares (59.80 per cent) of the bank before the issue.          

Domestic financial institutions, including banks, will continue to hold 6,80,73,116 shares in Vijaya Bank, but their percentage holding will drop to 7.92 per cent post-issue from 12.27 per cent earlier.

Foreign institutional investors, non-resident Indians and overseas corporate bodies together will see their holding of 1,72,87,776 shares in the bank reduced from 3.13 per cent to 2.01 per cent post conversion while the public holding of 13,75,11,366 shares will reduce from 24.80 per cent to 16.01 per cent post issue.

Total equity shares of Vijaya Bank will increase to 85,91,19,307 post issue to 55,44,73,458  before conversion of the bonds.