In a move that could give a fillip to the proposed strategic disinvestment of government and LIC’s stake in IDBI Bank, SEBI has acquiesced to the government’s request for re-classification of its holding in the bank as “public” post the disinvestment, subject to conditions .
The market regulator has relaxed the requirements specified in its Listing Obligations and Disclosure Requirements (LODR) regulations relating to reclassification of promoter/ promoter group entities following an application made by the government through the Department of Investment and Public Asset Management (DIPAM).
According to Regulation 31A(3)(b)(I) of LODR regulations: “Reclassification of status of a promoter/ person belonging to promoter group to public shall be permitted by the stock exchanges only upon satisfaction of the following conditions…
“…the promoter(s) seeking reclassification and persons related to the promoter(s) seeking reclassification shall not: together, hold more than 10 per cent of the total voting rights in the listed entity…”
While giving relaxation from the aforementioned regulation, SEBI said two conditions need to be fulfilled: the voting rights of the government shall not exceed 15 per cent of the total voting rights of the bank; and the intention of the government to get its shareholding re-classified as public holding shall be specified in the letter of offer dispatched to the shareholders of the bank in connection with the open offer made by the new acquirer.
The re-classification as public shareholder could reassure potential global investors that the government and LIC as promoter/promoter group may take a hands-off approach after the disinvestment.
The government and LIC’s current shareholding in IDBI Bank are at 45.48 per cent and 49.24 per cent, respectively.
After completion of the strategic disinvestment, IDBI Bank has to make an application to the stock exchanges for re-classification of government holding under public category, SEBI said.
Further, the new acquirer has to ensure compliance with minimum public shareholding requirements within a period of one year from the completion of the open offer.
The relaxation in LODR regulations comes in the wake of government requesting SEBI to treat the residual holding of the government in IDBI Bank as a pure financial investment and accordingly re-classify it as “public”.
This is subject to conditions that the government, post-disinvestment does not exercise control over the affairs of the bank, does not have any special rights with respect to the bank, and is not represented on its Board of Directors nor act as key managerial personnel .