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(Photo: Mint)
(Photo: Mint)

Promoter's stake reduces to 40% after block deal, says Bandhan Bank

  • Bandhan Financial Holdings sold 20.95% stake through secondary market sale to comply with RBI guidelines
  • On Monday, shares of Bandhan Bank slid by 10.52% to 308.80 per share

New Delhi: Bandhan Bank on Monday said the promoter's stake in it reduced to 40% after the block deal in which 337.4 million shares were sold.

The lender told stock exchanges that its promoter Bandhan Financial Holdings Limited was "required to bring excess shareholding to 40% of paid-up voting equity capital of the bank" and hence it "diluted excess shareholding of 20.95% through secondary market sale".

On Monday, shares of Bandhan Bank slid by 10.52% to 308.80 per share after reports said that its 34.56 crore shares -- or 21.5 per cent of total equity -- exchanged hands in 27 large trades.

"We would like to inform that in terms of the Guidelines for Licensing of New Banks in the Private Sector issued by RBI on February 22, 2013, ('Licensing Guidelines') and Licensing conditions, Bandhan Financial Holdings Limited ('BFHL' or the 'NOFHC'), the holding company of the Bank was required to bring its excess shareholding to 40 per cent of the paid-up voting equity capital of the Bank.

"The Bank has been exploring various options / opportunities to bring the shareholding to the prescribed level. Pursuant to amalgamation of GRUH Finance Limited into and with the Bank effective from October 17, 2019 and consequent to issuance of fresh equity shares to the Shareholders of GRUH on October 21, 2019, the shareholding of NOFHC in the Bank diluted from 82.26 per cent to 60.96 per cent of its paid-up voting equity share capital.

"In order to be fully compliant with the Licensing Guidelines, the NOFHC has today i.e. August 03, 2020 informed the Bank that it has diluted its excess shareholding of 20.95 per cent i.e. 33,73,67,189 equity shares of Rs. 10/- (Rupees Ten only) each fully paid-up in the Bank through secondary market sale. Consequent to the above transaction, the shareholding of NOFHC in the Bank has been reduced to 40 per cent of the total paid-up voting equity capital of the Bank which is in compliance with the aforesaid Guidelines and the licensing conditions of the Bank," the lender said in a regulatory filing.

The RBI imposed restrictions on branch expansion by Bandhan Bank, which specializes in lending to small borrowers, after it failed to lower its stake to 40% last year. Bandhan Bank then agreed to combine with mortgage financier Gruh Finance Ltd. in a $11.7 billion deal to pare founder’s stake as mandated, following which the central bank partially relaxed its curbs on the lender.

“RBI is very clear that shareholding in private banks should be diversified as it reduces concentration risk," Karthik Srinivasan, group head, financial sector ratings at ICRA Ltd told Bloomberg. “The urgency of stake sale by Bandhan founders shows that RBI is on its track on its rules regarding shareholding in private banks."

The central bank is currently reviewing its norms on shareholding in private banks, which stipulate founders cut their stake to 15%, as it aims to improve corporate governance in a sector plagued by bad loans.

Some of Bandhan Bank’s profitability metrics, including return on assets and return on equity are the highest among Indian banks.

Credit Suisse Securities (India) Pvt., J.P. Morgan India Pvt., Goldman Sachs (India) Securities Pvt. and JM Financial Institutional Securities Ltd. are joint bookrunners for the deal.The central bank is currently reviewing its norms on shareholding in private banks, which stipulate founders cut their stake to 15%, as it aims to improve corporate governance in a sector plagued by bad loans.

Some of Bandhan Bank’s profitability metrics, including return on assets and return on equity are the highest among Indian banks.

Credit Suisse Securities (India) Pvt., J.P. Morgan India Pvt., Goldman Sachs (India) Securities Pvt. and JM Financial Institutional Securities Ltd. are joint bookrunners for the deal.

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