Sebi keeps the share sale in abeyance due to past violation by RBL Bank
Mumbai: RBL Bank Ltd’s initial public offering (IPO) remains enmeshed in regulatory issues with the capital markets watchdog saying in its latest communication that the share sale had been “kept in abeyance due to past violation by the company".
RBL Bank applied to the Securities and Exchange Board of India (Sebi) on 25 June 2015, seeking to raise ₹ 1,100 crore through an IPO. The lender is yet to receive clearance. In its weekly updates, Sebi has maintained that the IPO is under consideration and that past violations are being examined.
The latest status update by Sebi on Monday that the IPO was in abeyance does not mean the IPO application has been rejected, executives at the bank and investment bankers said.
“There is no material change or development in the matter in recent days. The IPO is certainly on based on an ongoing mutual discussion with Sebi on settling the matter. I am confident of an early resolution," said Vishwavir Ahuja, managing director and chief executive officer, RBL Bank.
“Abeyance does not mean it has been rejected; it simply means the DRHP (draft red herring prospectus) continues to be on hold and the regulator will have to suggest a way to resolve this. The previous management had allotted shares to more than 1,000 investors and the existing management is trying to resolve the matter," an investment banker aware of the matter said on condition of anonymity.
In its DRHP filed with Sebi, RBL Bank disclosed that in the years 2003 and 2006, it issued shares to more than 200 subscribers. The previous board had allotted shares via rights issues to 2,591 investors on 19 February 2003. It further allotted shares to 1,969 investors through another rights issue on 21 February 2006, according to risk factors highlighted by the company in its DRHP. These share issues do not comply with the new rules.
As per the Companies Act, if there are more than 49 investors and up to 200 investors, a company has the option of refunding the investors with interest and no penal action would be taken.
Sebi’s regulations were amended accordingly in December 2015.
“The current management is clean and if Sebi decides to take any action, it will have to be against the previous management because the current management did not violate rules," said Prithvi Haldea, chairman and managing director at Prime Database, a primary market tracker.
“Since the bank is in urgent need to raise capital, Sebi needs to decide whether to allow it to go ahead with the public issue by either providing a refund option or offering investors a chance to exit through an offer for sale (OFS) route in the public issue," Haldea said.
Haldea cited the example of Thyrocare Technologies Ltd, which had previously violated the norm of offering shares to over 49 investors. The company refunded some of its investors and resolved the issue; it refiled its papers with the markets regulator on 15 December 2015 and is awaiting Sebi clearance.
On 21 December 2015, RBL Bank raised ₹ 488 crore through a pre-IPO round of fund-raising.
The private lender raised the funds from international investors, including Asian Development Bank (ADB) and the UK government’s development finance arm, CDC Group Plc., among others.
In 2014-15, the bank reported a revenue of ₹ 2,356.4 crore, compared with ₹ 1,612.5 crore in the previous year.
It reported a profit of ₹ 208.4 crore as against a profit of ₹ 92.8 crore a year ago.