Bank of India- Order in the matter of exemption application under regulation 11(1) of SEBI (SAST) Regulations, 2011

WTM/PS/57/CFD-DCR-1/SEPT/2015 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER In the matter of proposed acquisition of equity shares of Bank of India - Application filed under regulation 11(1) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.

1. Bank of India (hereinafter referred to as "the Target Company" or "the Bank") is a public sector bank, having its registered office at Star House - I, Plot No. C-4, G Block, Bandra Kurla Complex, Bandra East, Mumbai - 400051. The shares of the Bank are listed on the Bombay Stock Exchange Limited ("BSE") and the National Stock Exchange of India Limited ("NSE").

2. The Bank filed an application dated August 28, 2015 with the Securities and Exchange Board of India (hereinafter referred to as "the SEBI"), on behalf of its promoter, the Government of India (hereinafter referred to as "the GoI"), under regulation 11(1) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (hereinafter referred to as "the Takeover Regulations"), seeking exemption for the GoI from the applicability of regulation 3(2) of the Takeover Regulations in respect of the proposed acquisition of 12,70,04,655 equity shares by the GoI through a proposed preferential allotment by the Bank. The following were inter alia submitted in the application dated August 28, 2015: (i) The paid-up capital of the Bank is ₹664.91 crore. Presently, the GoI is holding 42,83,67,513 shares i.e. 64.43% of the paid-up capital. (ii) The GoI, as part of its project "INDRADHANUSH PLAN" for revamp of public sector banks, has decided to infuse additional capital in public sector banks including Bank of India. In this regard, the GoI, through the Ministry of Finance, had vide letter dated August 19, 2015, conveyed its decision to infuse capital to the tune of ₹2,455 crore in the Bank against allotment of equity on preferential basis in favour of the GoI. (iii) Pursuant to the same, the Board of Directors of the Bank, in their meeting held on August 26, 2015, approved raising of equity capital to the extent of ₹2,455 crore by way of issue of equity shares in favour of the GoI on preferential basis subject to the approval of the Reserve Bank of India ("RBI"), the shareholders and other statutory authorities. An Extra- Ordinary General Meeting ("EGM") of the shareholders has been convened on September

28, 2015 to pass the necessary resolution for the proposed issue of the equity shares to the GoI on preferential basis. (iv) The relevant date has been taken as August 28, 2015, for ascertaining the issue price to arrive at the quantity of shares to be issued. The issue price of ₹193.30 per equity share is arrived at in terms of regulation 76(1) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 ("the ICDR Regulations"). Based on the issue price and the issue size of ₹2,455 crore, the total number of shares that would be allotted to the GoI would be 12,70,04,655 equity shares. Accordingly, the post issue shareholding of the GoI would be 55,53,72,168 equity shares (i.e. 70.13%). (v) As the difference between the pre-allotment and post-allotment shareholding of the GoI in the Bank may be over 5% (the shareholding of the GoI may increase from 64.43% to 70.13%, an increase of around 5.70% ), the GoI vide letter dated August 19, 2015 has asked the Bank to take necessary steps/approvals.

3. In the application, the following points were put forth as justification by the Bank for seeking exemption on behalf of the GoI from SEBI : (i) GoI, as part of its project "INDRADHANUSH PLAN" for revamping of public sector banks has decided to infuse additional capital of ₹2,455 crore in the Bank. (ii) The Bank's CET – I (Common equity capital) under Basel III as on June 30, 2015 was 7.23%, Tier I at 8.23% and CRAR at 10.75%. (iii) This infusion of capital by the GoI will also give the Bank additional leverage to raise further equity capital through Rights/ FPO or from Qualified Institutional Placement (QIP/ GDR) at a later date, as and when the need arises. (iv) From the notice of EGM, it is noted that even after infusion of capital by the GoI and proposed preferential allotment, the public shareholding would be maintained at around 29.87% and there would no change in control in the management of the Bank.

4. The shareholding pattern in the Target Company, prior to and post the proposed allotment to the GoI, as mentioned in the application, is given below : Shareholding pattern in the Target Company Category Before the proposed issue of Post issue of equity through equity proposed preferential issue to GoI No. of shares Percentage No. of shares Percentage Promoter Group (GoI) 42,83,67,513 64.43 55,53,72,168 70.13 Public 23,65,41,002 35.57 23,65,41,002 29.87 Total 66,49,08,515 100 79,19,13,170 100

5. I have considered the application of the Bank, the documents submitted therewith and other material available on record. The GoI is a shareholder of the Bank under the category 'Promoter and Promoter Group', and is the proposed Acquirer. The GoI presently holds 42,83,67,513 shares in the Target Company, which constitutes 64.43% of the total number of equity shares. I note that the GoI, as part of its project "INDRADHANUSH PLAN" for revamp of public sector banks has decided to infuse additional capital to the tune of ₹2,455 crore in the Bank against allotment of equity shares on preferential basis. The Board of Directors of the Bank have approved the raising of additional equity capital to the extent of ₹2,455 crore through the issue of equity shares in favour of GoI on preferential basis.

6. The issue price for the proposed allotment has been fixed at ₹193.30 per equity share of ₹10 each, in terms of regulation 76(1) of the ICDR Regulations, taking into consideration August 28, 2015 as the 'relevant date'. The proposed allotment of 12,70,04,655 fresh equity shares to the GoI on a preferential basis would increase the shareholding of the GoI from 64.43% to 70.13%. This resultant increase in the shareholding/voting rights of the GoI of around 5.70%, would trigger the provisions of Regulation 3(2) of the Takeover Regulations. Accordingly, the Bank on behalf of the GoI, has sought exemption from the applicability of the said regulation.

7. As per the explanatory statement to the EGM notice, the Bank needs additional capital to comply with Basel II and Basel III requirements relating to the capital adequacy. The capital raised through the infusion of funds by the GoI would be utilized to shore up the capital adequacy and to fund its general business needs. In this regard, I note that such capital infusion against the proposed allotment would also help the Bank to sustain the credit growth and provide additional leverage to raise further equity capital at a later date, as and when the need arises. I note that the capital adequacy of the Bank is a requirement to protect its small customers as well as the public shareholders who have invested in its equity. Further, there would be no change in the management control in the Target Company.

8. Considering the proposed allotment of equity to the GoI in the light of the reasons stated by the Bank and the observations made above, I am of the considered view that this is a fit case to grant exemption under regulation 11 of the Takeover Regulations to the GoI from the obligation to make an open offer stipulated under regulation 3(2) of the Takeover Regulations with respect to its proposed increase of shares/voting rights from 64.43% to 70.13% in the Target Company, pursuant to proposed preferential issue and allotment of 12,70,04,655 equity shares.

9. In view of the foregoing, I, in exercise of the powers conferred upon me under section 19 of the Securities and Exchange Board of India Act, 1992 read with regulation 11(5) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, hereby grant exemption to the proposed acquirer, the Government of India, from complying with the requirements of regulation 3(2) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 with respect to its proposed acquisition of 12,70,04,655 equity shares of Bank of India by way of preferential allotment. The above exemption is subject to the following conditions in the interests of investors in securities and the securities market: (a) The proposed acquisition shall be in accordance with the relevant provisions of the Companies Act, 1956, the Companies Act, 2013, the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009, the Listing Agreement, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015(Listing Regulations) and all other applicable laws. (b) The GoI/ Target Company shall ensure compliance with the statements, disclosures and undertakings made in the application and in subsequent correspondence. (c) The exemption is only limited to the requirements of making open offer under regulation 3(2) of the Takeover Regulations and shall not extend to other obligations (e.g. disclosure requirements under Chapter V of the said Takeover Regulations, Listing Agreement/ Listing Regulations or any other law) of the GoI/Target Company.

10. Accordingly, the application dated August 28, 2015 filed by Bank of India on behalf of the Government of India is disposed off.

Date : September 29th, 2015 PRASHANT SARAN Place : Mumbai WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA