Sebi exempts govt from making open offer to Canara Bank's shareholders

Markets regulator Sebi on Thursday exempted the government from making an open offer to the shareholders of Canara Bank following the proposed equity infusion that would hike its stake in the lender by 7.9 percent. The directive comes after the bank filed an application in November on behalf of its promoter-- Government of India -- seeking exemption from the applicability of SAST (Substantial Acquisition of Shares and Takeovers) or Takeover Regulations.

The central government has proposed to infuse capital worth Rs 6,571 crore in the lender against allotment of equity on a preferential basis in favor of it. The capital infusion is part of the government's program to shore up the bank's capital base for meeting Basel norms. The government, presently, holds a 70.62 percent stake in Canara Bank and the proposed allotment of 27,69,88,576 equity shares of the lender would increase its stake by 7.9 percent to 78.52 percent mandating an open offer under the Takeover Regulation.

Besides, after the proposed acquisition, the public shareholding in the bank will decrease from 29.38 percent to 21.48 percent. In order, the Securities and Exchange Board of India (Sebi) said there would be no change in the management control post equity infusion in the bank and the proposed infusion of additional capital will be utilized to improve capital adequacy and to fund general business needs of the bank.

"There will be no change in control of the target company (Canara Bank) under the proposed acquisition as the change will only be in the quantum of shares held by the proposed acquirer (government)," it said. Accordingly, the regulator has granted an exemption to the government from complying with the requirements of Takeover Regulations concerning the proposed acquisition of a 7.9 percent stake in Canara Bank during the financial year 2019–20, through the proposed preferential allotment.