Allahabad Bank share sale: staff allege coercion
Allahabad Bank’s employees send complaints to RBI, Sebi, prime minister’s office over the diktat issued to staff to participate in an ongoing share sale
Kolkata: The management of Allahabad Bank is said to have issued a diktat to all its 24,155 employees—from the chief executive officer (CEO) to the sweeper—to participate in an ongoing share sale to employees.
The bank is looking to sell 50 million shares through an employee share purchase scheme, or ESPS, and it has been determined how many shares are to be purchased by each employee based on grade.
There is nothing unusual in the management of a bank to encourage or appeal to employees to participate in such a share sale, but in this case, workers are alleging coercion.
At least half a dozen officials of the bank said they feared retribution if they failed to buy the shares.
A section of outraged workers have approached the regulators—the Reserve Bank of India (RBI) and Securities and Exchange Board of India (Sebi)—said the officials cited above, asking not to be identified. Some have even reported the matter to the prime minister’s office, seeking intervention.
“The bank has made an appeal to the employees to subscribe... as it is a lifetime opportunity... for employees to become stakeholders in the bank’s growth as a separate investor class,” a spokesperson for the bank said in an emailed statement, denying the allegation of coercion.
“We have requested all our employees to participate in the issue,” said N.K. Sahoo, executive director.
“We are happy with the interest we have seen so far.” Asked if the management was expecting full subscription, he said even 75-80% subscription will be seen as a “success”..
The bank is selling shares at Rs53.94 apiece. The issue opened on 31 January, when Allahabad Bank’s shares closed on BSE at Rs66.65 each. On Thursday, the lender’s shares closed at Rs59.25 each, up 2.42% from Wednesday, in a firm market. The ESPS is set to close on 13 February.
Shares to be allotted under the scheme are to be locked in for one year, which means that those subscribing to the issue cannot sell their shares until the end of the lock-in period.
The bank will offer 6,600 shares to its managing director and CEO—which means Usha Ananthasubramanian has to fork out Rs3,56,004 if she chooses to fully purchase the shares on offer—and the two whole-time directors are to be given up to 6,500 shares each. At the other end of the spectrum, sweepers on 3/4th and half pay are to be given, respectively, 300 and 200 shares each.
The bank has 7,057 scale-I officers, and collectively, they have been allotted 16.58 million shares, or 2,350 each. This means they will have to invest around Rs127,000 each to fully subscribe to the issue. Scale-III officers are expected to buy an additional 9.85 million shares, requiring an investment of around Rs216,000 each.
The bank has 2,464 such officers. The bank’s 6,351 clerical grade workers have been offered up to 1,250 shares each.
Unions representing Allahabad Bank’s officers were divided over the ESPS.
All India Bank Officers’ Confederation had backed the proposal to sell shares to the lender’s own employees, while the All India Bank Officers’ Association had opposed it. However, unions representing the clerical grade employees—Bank Employees Federation of India and All India Bank Employees’ Association—did not support the move.
Officers of Allahabad Bank are under intense pressure to subscribe fully to the share sale, said the unidentified employees cited above. Those in the clerical grade are also under pressure but it may be easier for them to deal with the situation, the officials added.
The bank’s shares have lately been under pressure. At the time of announcement of the ESPS in December, the bank’s shares were trading at Rs72-74.
The aim was to raise risk capital as well as shore up investor confidence in the face of mounting sticky assets.
The bank has, in line with Indian securities market regulations, offered a 25% discount over the average market price of its shares in the two weeks till the announcement of the scheme.
However, the recent slide in the bank’s share price has taken the sheen off the discount, according to the employees cited above. The one-year lock-in is an additional uncertainty, they said.
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