Exemption order under regulation 11 of SEBI (SAST) Regulations, 2011 in the matter of Jammu & Kashmir Bank Ltd.

WTM/GM/CFD/ 81 /2019–20 SECURITIES AND EXCHANGE BOARD OF INDIA ORDER UNDER SECTION 11(1) AND SECTION 11(2)(h) OF THE SEBI ACT READ WITH REGULATION 11(5) OF THE SECURITIES AND EXCHANGE BOARD OF INDIA (SUBSTANTIAL ACQUISITION OF SHARES AND TAKEOVERS) REGULATIONS, 2011. IN THE MATTER OF PROPOSED ACQUISITION OF SHARES AND VOTING RIGHTS IN – TARGET COMPANY JAMMU AND KASHMIR BANK LIMITED ACQUIRER GOVERNMENT OF JAMMU AND KASHMIR

BACKGROUND –

1.1 Jammu and Kashmir Bank Limited (“Target Company”) is a Scheduled Bank having its Head Office at M. A. Road, Srinagar–190001, Jammu and Kashmir. The Target Company was incorporated under the Jammu and Kashmir Companies Act, 1977. The shares of the Target Company are listed on the BSE Limited (“BSE”) and the National Stock Exchange of India Limited (“NSE”).

1.2 The Target Company filed an application dated February 25, 2020 (“Application”), on behalf of its Promoter i.e. the Government of Jammu and Kashmir (“Proposed Acquirer”) seeking exemption from the applicability of Regulation 3(2) of the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“Takeover Regulations”). Exemption Order in the matter of Jammu and Kashmir Bank Limited

1.3 Regulation 3(2) of the Takeover Regulations, states – “3. Substantial acquisition of shares or voting rights. (2). No acquirer, who together with persons acting in concert with him, has acquired and holds in accordance with these regulations shares or voting rights in a target company entitling them to exercise twenty-five per cent or more of the voting rights in the target company but less than the maximum permissible non-public shareholding, shall acquire within any financial year additional shares or voting rights in such target company entitling them to exercise more than five per cent of the voting rights, unless the acquirer makes a public announcement of an open offer for acquiring shares of such target company in accordance with these regulations: Provided that such acquirer shall not be entitled to acquire or enter into any agreement to acquire shares or voting rights exceeding such number of shares as would take the aggregate shareholding pursuant to the acquisition above the maximum permissible non-public shareholding.”

1.4 From the aforesaid Application, the following is noted –

A. The Government of Jammu & Kashmir, vide its letter dated February 4, 2020, conveyed to the Target Company that a provision of ₹500 Crores has been kept for capital infusion/recapitalization of the Target Company during the remaining period of the Financial Year 2019–20.

B. Pursuant to the above letter, the Target Company in its Board Meeting held on February 7, 2020, had approved raising of capital by way of issue of equity shares on a preferential basis to the Proposed Acquirer/Promoter i.e. the Government of Jammu and Kashmir (“Proposed Acquisition”).

C. The Target Company is conducting a Postal Ballot (during the period from February 18, 2020 to March 18, 2020) for seeking approval of its shareholders for the Proposed Acquisition by way of a Special Resolution.

D. The Target Company has decided to issue 15,65,92,546 equity shares of face value ₹1 each to the Proposed Acquirer/Promoter, at an issue price of ₹31.93, as determined under the provisions of Chapter V of SEBI (Issue of Capital & Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”).

E. Post the preferential allotment, the Promoter’s shareholding will increase from 59.23% to 68.18%, which is in excess of 5% of the equity paid–up capital of the Target Company during the Financial Year 2019–20, thereby attracting the provision of Regulation 3(2) of the Takeover Regulations.

F. The shareholding pattern in the Target Company (i) prior to the Proposed Acquisition and (ii) subsequent to the Proposed Acquisition, is as under – TABLE I – SHAREHOLDING IN THE TARGET COMPANY (SOURCE: APPLICATION) CATEGORY PRIOR TO PROPOSED PROPOSED SUBSEQUENT TO ALLOTMENT ACQUISITION PROPOSED ALLOTMENT NO. OF SHARES NO. OF SHARES NO. OF SHARES AND % AND % AND % A. PROMOTER AND 32,98,33,032 15,65,92,546 48,64,25,578 PROMOTER GROUP [59.23%] [8.95%] [68.18%] B. PUBLIC 22,70,25,360 – 22,70,25,360 SHAREHOLDING [40.77%] [31.82%] C. GRAND TOTAL (A + B) 55,68,58,392 – 71,34,50,938 [100.00%] [100.00%]

G. Submissions made by the Target Company on behalf of the Proposed Acquirer/Promoter for exemption from the provisions of Regulation 3(2) of the Takeover Regulations.

In its Application on behalf of the Proposed Acquirer/Promoter, the Target Company inter alia submitted as under – a. The aforesaid amount of equity capital proposed to be infused by the Proposed Acquirer/Government of Jammu & Kashmir in the Target Company, i.e. an amount of ₹500 Crore, is required and shall be utilized by the Target Company to meet the needs of its growing business, including long term capital requirements for pursuing its growth plans and to maintain its Capital Adequacy Ratio as per the regulatory guidelines/norms laid down by the Reserve Bank of India (“RBI”).

b. The Target Company, pursuant to the completion of the Proposed Acquisition, shall remain compliant with Minimum Public Shareholding requirement in accordance with the provisions of Regulation 38 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 as 31.82% of the shareholding of the Target Company will be held by the public.

FINDINGS –

2.1 I have considered the Application made by the Target Company on behalf of the Proposed Acquirer/Promoter along with other relevant material available on record. In this regard, I note as under – i. From Table I at page 4, it is observed that as on February 25, 2020, the Proposed Acquirer/Promoter i.e. the Government of Jammu and Kashmir, held 32,98,33,032 (59.23%) equity shares in the Target Company.

ii. Subsequent to the Proposed Acquisition indicated at Table I at page 4 i.e. preferential allotment of 15,65,92,546 equity shares, the Proposed Acquirer/Promoter will hold 48,64,25,578 (68.18%) equity shares in the Target Company. Consequently, the public shareholding in the Target Company will decrease from 40.77% to 31.82%.

iii. The resultant change in shareholding on account of the allotments indicated at paragraph (ii) above, will increase the concentration of the Proposed Acquirer in the Target Company by 8.95% during the Financial Year 2019–20 i.e. more than 5%, thereby attracting the provisions of Regulation 3(2) of the Takeover Regulations.

iv. There will be no change in control of the Target Company pursuant to the Proposed Acquisition as the change will only be in the quantum of holding the shares by the Proposed Acquirer/Promoter. Further, there will be no change in the number of equity shares held in the Target Company, by the public shareholders, pursuant to the proposed transactions.

2.2 The infusion of additional capital by the Proposed Acquirer is stated to be utilized to improve the capital adequacy and to fund general business needs of the Target Company. Accordingly, I am of the considered view that exemption as sought for in the Application made by the Target Company, be granted to the Proposed Acquirer/Promoter, subject to the conditions stated herein.

ORDER –

3.1 I, in exercise of the powers conferred upon me under Section 19 read with Section 11(1) and Section 11(2)(h) of the Securities and Exchange Board of India Act, 1992 (“SEBI Act”) and Regulation 11(5) of the Takeover Regulations, hereby grant exemption to the Proposed Acquirer, viz. the Government of Jammu and Kashmir, from complying with the requirements of Regulation 3(2) of the Takeover Regulations with respect to the Proposed Acquisition of 8.95% equity shares in the Target Company viz. Jammu and Kashmir Bank Limited during the Financial Year 2019–20, through the proposed preferential allotment as mentioned in the Application.

3.2 The exemption so granted is subject to the following conditions:

i. The Proposed Acquisition shall be in accordance with the relevant provisions of the Companies Act, 2013 and any other applicable law. ii. The Government of Jammu and Kashmir/Target Company shall ensure compliance with the statements and disclosures made in the Application. iii. The statements/ averments made or facts and figures mentioned in the Application are true and correct.

3.3 The exemption granted above is limited to the requirements of making open offer under the Takeover Regulations and shall not be construed as an exemption from the disclosure requirements under Chapter V of the Takeover Regulations; compliance with the SEBI (Prohibition of Insider Trading) Regulations, 2015 and the Listing Agreement/SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 or any other applicable provisions of securities laws.

3.4 The Application dated February 25, 2020 and subsequent communications filed by Target Company on behalf of the Proposed Acquirer, are accordingly disposed of.

3.5 A copy of this Order shall be forwarded to the recognised stock exchanges for their information and necessary action.

Place: Mumbai G. MAHALINGAM Date: March 18, 2020 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA