Band­han lists op­tions to cut pro­mot­ers’ share­hold­ing

Business Standard - - FRONT PAGE - NAMRATA ACHARYA

A day af­ter the Re­serve Bank of In­dia (RBI) put curbs on Band­han Bank for not com­ply­ing with share­hold­ing norms, the lender laid out sev­eral op­tions, in­clud­ing in­or­ganic growth, to re­duce the pro­mot­ers’ stake, in a con­fer­ence call with an­a­lysts on Satur­day.

The bank would con­sider buy­outs in the mi­cro, small and medium en­ter­prises

(MSME), hous­ing fi­nance, and mi­cro­fi­nance in­sti­tu­tion

(MFI) space, said Chief

Fi­nan­cial Of­fi­cer Su­nil

Sam­dani. The bank, he said, would also look at en­ter­ing the mu­tual fund and in­sur­ance busi­ness at the hold­ing com­pany level to re­duce the pro­mot­ers’ share­hold­ing.

How­ever, ac­cord­ing to the Se­cu­ri­ties and Ex­change Board of In­dia’s (Sebi’s) norms, the hold­ing com­pany can­not sell any shares for en­ter­ing other busi­nesses dur­ing the lockin pe­riod.

The bank told an­a­lysts that the tar­get of re­duc­ing the share­hold­ing from about 82 per cent to 40 per cent was strin­gent to ful­fil in the near term and, hence, “show­ing progress would be ap­pre­ci­ated”.

An­other op­tion that the bank will con­sider is a change in the hold­ing com­pany’s struc­ture. Ear­lier, one of the pro­pos­als con­sid­ered by Band­han Bank to re­duce the pro­mot­ers’ share­hold­ing was to merge Band­han Fi­nan­cial Ser­vices, Band­han Fi­nan­cial Hold­ing, and Band­han Bank. This would bring down the pro­mot­ers’ hold­ing to about 40 per cent. How­ever, in gen­eral, the RBI has been in favour of a hold­ing com­pany for a new bank, as it pro­tects de­pos­i­tors’ in­ter­ests.

On the op­tion of sec­ondary sale of shares, Sam­dani said that with the bank be­ing ad­e­quately cap­i­talised, any is­suance would de­pend on fund re­quire­ments.

Band­han Bank’s cap­i­tal ad­e­quacy ra­tio is in ex­cess of 30 per cent, and it was com­fort­able at the 16-18 per cent level, he said. Fur­ther, any is­suance, if needed, would be af­ter March 2019, when oneyear lock-in pe­riod ex­pires for the bank.

Also, the restric­tion on branch open­ing does not im­pact the bank’s growth plans, as it is al­ready close to its tar­get of open­ing 1,000 branches by March 2019. The bank had 937 branches at the end of Au­gust.

Li­cens­ing norms re­quire a bank to bring down the pro­moter hold­ing to 40 per cent within three years of start­ing op­er­a­tions. Band­han Bank com­menced op­er­a­tions on Au­gust 23, 2015.

Band­han Fi­nan­cial Hold­ings Lim­ited (BFHL) acts as the pro­mot­ing com­pany for Band­han Bank, and holds 82.28 per cent in the bank. The bank went for an ini­tial pub­lic of­fer­ing (IPO) in March this year, af­ter which the pro­moter hold­ing came down from 89.62 per cent. Ac­cord­ing to the Sebi rules, pro­mot­ers have a manda­tory one-year lock-in pe­riod af­ter the IPO in which they can­not sell their shares.

On Fri­day, the RBI with­drew the “gen­eral” per­mis­sion given to Band­han Bank to open branches and froze the re­mu­ner­a­tion of its man­ag­ing di­rec­tor (MD) and chief ex­ec­u­tive of­fi­cer (CEO), af­ter it failed to com­ply with the norm of bring­ing down pro­mot­ers’ share­hold­ing to 40 per cent by the dead­line of Au­gust 23. How­ever, the bank can open branches with the approval of the reg­u­la­tor.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.