Capital market regulator Sebi today exempted the government from making an open offer to public shareholders for acquiring shares of Indian Overseas Bank after the Rs 1,200 crore capital infusion that will raise its stake in the state-owned lender to 79 per cent.
The government, promoter of IOB, holds 73.80 per cent stake in the bank. It has proposed to acquire nearly 23 crore additional shares of the bank by way of preferential allotment against the Rs 1,200 crore infusion.
Once the government purchases these shares, its stake in IOB will rise by little over 5 per cent to 79.01 per cent.
As per the rules, when entities holding 25 per cent or more stake in a company acquire additional 5 per cent or more stake in the firm, they are required to make an open offer so as to provide an exit opportunity to the public shareholders.
In an order today, Securities and Exchange Board of India (Sebi) said that even after the proposed hike in government stake in IOB the minimum public shareholding level -- which is 10 per cent for public sector units -- would be maintained.
In addition, the market regulator said there would be no change in the management control at IOB.
Accordingly, Sebi said this was a "fit case to grant exemption" to the government from the obligation to make an open offer which is otherwise required under the norms.
IOB had filed an application dated November 8, 2013 with Sebi on behalf of the government seeking the exemption.
Sebi has allowed the exemption on conditions that the proposed acquisition would have to be in accordance with the relevant provisions of the Companies law and the government as well as IOB ensure compliance with the statements and disclosures made in its application to the market regulator, among other things.