Exemption order under Regulation 11 of SEBI (SAST) Regulations, 2011 in the matter of Canara Bank

WTM/GM/CFD/47/2019–2020 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 CANARA BANK ACQUIRER GOVERNMENT OF INDIA

BACKGROUND – 1.1 Canara Bank (“Target Company”) is a Scheduled Commercial Bank having its Head Office at 112 J C Road, Bangalore 560002. 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 November 05, 2019 (“Application”), on behalf of its Promoter i.e. the Government of India (“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”). 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.” Order in the matter of Canara Bank

1.4 From the aforesaid Application, as submitted by the Target Company, the following is noted – A. At the Board Meeting of the Target Company held on September 13, 2019, the Board of Directors approved the issue and allotment to the Proposed Acquirer such number of fully paid-up equity shares of Rs. 10/- each of the Target Company on preferential basis at such issue price including premium as determined under Chapter V of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”) aggregating up to Rs. 9000 crores. B. The Ministry of Finance, Govt. of India vide notifications/communications dated September 27, 2019 and September 30, 2019 conveyed their decision of infusing capital to the extent of Rs. 6571 crores in the Target Company during the current financial year through a preferential allotment of equity shares in favour of the Proposed Acquirer. C. The Target Company is seeking the consent of the shareholders, by way of a Postal Ballot (from 25.10.2019 to 23.11.2019), for passing a Special Resolution empowering the Board of Directors to issue and allot such number of equity shares of Rs. 10 each at such issue price as determined under Chapter V of the ICDR Regulations aggregating to Rs. 6571 crores. D. The Target Company has proposed to issue 27,69,88,576 equity shares of face value ` 10 each (aggregating ` 6571 crores) to the Proposed Acquirer at an issue price of ` 237.23 per share, as determined under Regulation 164 of the ICDR Regulations (“Proposed Acquisition”). E. The shareholding pattern in the Target Company as on (i) March 31, 2019 and (ii) subsequent to the Proposed Acquisition, is provided as under – TABLE I – SHAREHOLDING IN THE TARGET COMPANY (SOURCE: APPLICATION AND BSE WEBSITE ) CATEGORY AS ON 31.03.2019 PROPOSED SUBSEQUENT TO ACQUISITION PROPOSED ALLOTMENT NO. OF SHARES NO. OF SHARES NO. OF SHARES AND % AND % A. PROMOTER AND 53,19,44,775 27,69,88,576 80,89,33,351 PROMOTER GROUP 70.62% 78.52% (A)

B. PUBLIC 22,13,00,000 22,13,00,000 SHAREHOLDING (B) 29.38% 21.48% C. GRAND TOTAL (A + B) 75,32,44,775 1,03,02,33,351 100% 100%

F. The Board of Directors of the Target Company as provided in the Application, is as under – TABLE II – BOARD OF DIRECTORS OF THE TARGET COMPANY SR. NAME STATUS NO. 1. SHRI. THOTHALA NARAYANASAMY CHAIRMAN (NON EXECUTIVE PART TIME MANOHARAN NON OFFICIAL DIRECTOR) 2. SHRI. R A SANKARA NARAYANAN MD & CEO 3. SHRI. M V RAO EXECUTIVE DIRECTOR 4. SHRI. DEBASHISH MUKHERJEE EXECUTIVE DIRECTOR 5. SMT. A MANIMEKHALAI EXECUTIVE DIRECTOR 6. SHRI. SUCHIINDRA MISRA GOI NOMINEE DIRECTOR 7. SHRI. R KESAVAN RBI NOMINEE DIRECTOR 8. SHRI. S RAGHUNATH PART TIME NON-OFFICIAL DIRECTOR 9. SHRI. VENKATACHALAM RAMAKRISHNA SHAREHOLDER DIRECTOR IYER 10. SHRI. BIMAL PRASAD SHARMA SHAREHOLDER DIRECTOR

G. Submissions made by the Target Company on behalf of the Proposed Acquirer for exemption from the provisions of Regulation 3(2) of the Takeover Regulations. From the Application, as submitted by the Target Company, the following is observed –  Ministry of Finance, Government of India vide notifications/communications dated 27.09.2019 & 30.09.2019 has conveyed their decision of capital infusion aggregating to Rs. 6571 crores in Canara Bank during the current financial year by way of preferential allotment of equity shares in favour of the Government of India.  Further, the Bank has already received an amount of Rs. 6,571 crores (Rs. 1806 crores on 27.09.2019 and Rs. 4765 crores on 30.09.2019 respectively) in the account maintained with the Reserve Bank of India (“RBI”). The capital raised would be utilized to improve the capital adequacy and to fund general business needs of the Bank. The entire issue will be subscribed by the Government of India (“GOI”), the promoter of the Bank.  The Bank is conducting Postal Ballot (from 25.10.2019 to 23.11.2019) for seeking approval of the members for the proposed issue and allotment of upto 27,69,88,576 equity shares of Rs. 10 each at an issue price of Rs. 237.23 per share aggregating to Rs. 6571 crores [including premium of Rs. 227.23 per share] by way of Special Resolution.  Post the preferential allotment, GOI’s shareholding (the promoter) will increase from 70.62% (as on 30.09.2019) to 78.52%, (as on the date of the acquisition) that is in excess of 5% of the paid-up capital of the Bank during the current Financial year (2019 – 20) attracting the provision of Regulation 3(2) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as amended.  Thus, in order to remain compliant with the Regulation 3(2) of SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011, as amended, application is being preferred.

Consideration – 2.1 I have considered the Application made by the Target Company on behalf of the Proposed Acquirer along with other relevant material available on record. In this regard, I note as under – i. From Table I, it is observed that as on March 31, 2019, the Proposed Acquirer held 53,19,44,775 (70.62%) equity shares in the Target Company. ii. Subsequent to the Proposed Acquisition i.e. the preferential allotment of 27,69,88,576 equity shares, the Proposed Acquirer will hold 80,89,33,351 (78.52%) equity shares in the Target Company. iii. The resultant change in shareholding on account of the Proposed Acquisition will increase the concentration of shareholding of the Proposed Acquirer in the Target Company by 7.9% i.e. more than 5%, thereby attracting the provisions of Regulation 3(2) of the Takeover Regulations.

iv. Subsequent to the Proposed Acquisition, the shareholding of Proposed Acquirer in the Target Company would be 78.52% and, consequently, the public shareholding in the Target Company will decrease from 29.38% to 21.48%. v. The Target Company would be required to bring down the non-public shareholding to the level as specified and within the time permitted under Rule 19A(2) of the Securities Contracts (Regulation) Rules, 1957. vi. 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 shares held by the Proposed Acquirer. Further, there will be no change in the number of equity shares held by the public shareholders in the Target Company pursuant to the Proposed Acquisition. 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, 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 India, from complying with the requirements of Regulation 3(2) of the Takeover Regulations with respect to the proposed acquisition of 7.9% equity shares in the Target Company viz. Canara Bank 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 Proposed Acquirer/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.

iv. The Public Shareholding in the Target Company shall be increased to 25% to comply with minimum public shareholding requirements in terms of the Securities Contract (Regulation) Rules, 1957. 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 exemption from the disclosure requirements under Chapter V of the Takeover Regulations; compliance with the SEBI (Prohibition of Insider Trading) Regulations, 2015, the Listing Agreement/SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 or any other applicable provisions of securities laws. 3.4 The Application dated November 05, 2019 filed by Target Company on behalf of the Proposed Acquirer is 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: November 28, 2019 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA