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

WTM/GM/CFD/111 /2017–2018 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 DENA BANK ACQUIRER GOVERNMENT OF INDIA

BACKGROUND – 1.1 Dena Bank (“Target Company”) is a Scheduled Commercial Bank having its Head Office at Dena Corporate Centre, C-10, “G” Block, Bandra Kurla Complex, Bandra (E), Mumbai – 400 051. The Target Company was incorporated on 19th July 1969. 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 March 03, 2018 (“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”). The Application was revised on March 23, 2018 (“Revised Application”).

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:

Order in the matter of Dena Bank

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, Revised Application and the e–mail dated March 09, 2018 and March 23, 2018, as submitted by the Target Company, the following is noted –

A. Vide a letter dated January 24, 2018, the Government of India proposed an infusion of capital in the Target Company, amounting to ` 3045 Crore.

B. At the Board Meeting of the Target Company held on February 14, 2018, the Board of Directors approved raising of additional equity capital to the extent of ` 3045 Crore by way of issue of equity shares on a preferential basis to the Proposed Acquirer/Promoter i.e. the Government of India (“Proposed Acquisition”).

C. An Extra–Ordinary General Meeting (“EGM”) of shareholders in the Target Company is convened on March 27, 2018, for obtaining the requisite approval/special resolution for the proposed acquisition.

D. The Target Company has decided to issue 112,81,95,628 equity shares of face value ` 10 each (aggregating ` 3045 Crores) to the Proposed Acquirer/Promoter, at an issue price of ` 26.99 as determined under Regulation 76(1) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (“ICDR Regulations”).

E. The Government of India had also acquired 15,62,09,320 equity shares during the financial year 2017-18 by way of preferential allotment in August 2017, after which 13,74,18,819 Equity Shares were issued by way of a Qualified Institutions Placement on October 16, 2017.

F. The shareholding pattern in the Target Company as on (i) March 31, 2017; (ii) March 23, 2018 i.e. prior to the proposed acquisition and (iii) subsequent to the proposed acquisition, is provided as under –

TABLE I – SHAREHOLDING IN THE TARGET COMPANY (SOURCE: REVISED APPLICATION AND BSE WEBSITE ) CATEGORY AS ON AS ON PROPOSED SUBSEQUENT TO 31.03.2017 23.03.2018 ACQUISITION PROPOSED PRIOR TO ALLOTMENT PROPOSED ALLOTMENT NO. OF NO. OF NO. OF SHARES NO. OF SHARES SHARES SHARES AND % AND % AND % AND % A. PROMOTER AND 53,96,26,896 69,58,36,216 112,81,95,628 182,40,31,844 PROMOTER GROUP (68.55%) (61.53%) (19.21%) (80.74%) B. PUBLIC 24,75,22,988 43,50,14,486 43,50,14,486 SHAREHOLDING (31.45%) (38.47%) (19.26%) C. GRAND TOTAL (A + B) 78,71,49,884 113,08,50,702 225,90,46,330 During the Financial Year 2017–18, the Target Company allotted 15,62,09,320 equity shares to the Government of India, 4,48,65,702 equity shares to LIC of India and 52,06,977 equity shares under Preferential basis on August 4, 2017, resulting in increase in shareholding of the Government of India from 68.55% to 70.04%. Consequently, the public shareholding in the Target Company decreased from 31.45% to 29.96%. Subsequently, pursuant to Qualified Institutions Placement, 13,74,18,819 Equity Shares were issued to eligible qualified institutional buyers at the issue price of Rs. 29.20 per Equity Share on October 16, 2017. As a result, the public shareholding in the Target Company increased from 29.96% to 38.47% and the Promoter shareholding decreased to 61.53%.

G. 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. RAMESH SINGH EXECUTIVE DIRECTOR 2. RAJESH KUMAR YADUVANSHI EXECUTIVE DIRECTOR 3. ASHOK KUMAR SINGH GOVERNMENT NOMINEE DIRECTOR 4. SHIRISH C. MURMU RBI NOMINEE DIRECTOR 5. AMIT CHATERJEE PART-TIME (NON-OFFICIAL) DIRECTOR 6. G. GOPALAKRISHNA PART-TIME (NON-OFFICIAL) DIRECTOR 7. UMESH BELLUR SHAREHOLDER DIRECTOR 8. V. CHANDRASEKARAN SHAREHOLDER DIRECTOR 9. YASHO VERDHAN VERMA SHAREHOLDER DIRECTOR

H. 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.

From the Application, Revised Application filed on behalf of the Proposed Acquirer/Promoter and the e–mail dated March 09 and March 23, 2018, as submitted by the Target Company, the following is observed – a) The Government of India vide letter F. No. 7/38/2014-BOA dated January 24, 2018 (capital infusion in PSB reforms agenda) has decided to infuse capital to the tune of ` 3045 Crores in the Bank by way of preferential allotment of equity shares in favour of Govt. of India. b) The Bank is conducting an EGM on March 27, 2018 for seeking approval of the members for the proposed issue and allotment of upto 112,81,95,628 equity shares at a price of ` 26.99 per share aggregating ` 3045 crore by way of special resolution. c) Post the preferential allotment, GOl's shareholding (the promoter) will increase from 68.55 % (as on March 31, 2017) to 80.74 %, (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 (2017-18) attracting the provision of Regulation 3(2) SAST Regulations, 2011. d) Thus, in order to remain compliant with the Regulation 3 (2) of SEBI (SAST) Regulations, 2011, as amended, the application is being preferred. 1.5 Vide e–mail dated March 7, 2018, SEBI sought clarification from the Target Company regarding compliance with minimum public shareholding requirements in terms of Securities Contracts (Regulation) Rules, 1957

1.6 The Department of Financial Services, Ministry of Finance, Govt. of India, vide letter dated March 21, 2018 has declared that the Govt. of India, being promoter of the Bank will comply with minimum public shareholding requirements in terms of Securities Contracts (Regulation) (Third Amendment) Rules, 2017 in due course of time.

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, it is observed that as on March 31, 2017, the Acquirer/ Promoter i.e. the Government of India, held 53,96,26,896 (68.55%) equity shares in the Target Company.

ii. The Proposed Acquirer/Promoter i.e. the Government of India had acquired 15,62,09,320 equity shares during the financial year 2017 through preferential allotment in August 2017, and as a result the shareholding of promoter increased from 68.55% to 70.04% (increase of 1.49%).

iii. Pursuant to the QIP issue, the Proposed Acquirer/Promoter i.e. the Government of India, held 69,58,36,216 (61.53%) equity shares in the Target Company on March 03, 2018, i.e. prior to the Proposed acquisition. iv. Subsequent to the Proposed acquisition indicated at Table I i.e. preferential allotment of 112,81,95,628 equity shares, the Proposed Acquirer/Promoter will hold 182,40,31,844 (80.74%) equity shares in the Target Company. Consequently, the public shareholding in the Target Company will decrease to 19.26%. v. The Government of India, being the promoter of the Bank has undertaken to comply with minimum public shareholding requirements in terms of Securities Contracts (Regulation) (Third Amendment) Rules, 2017 in due course of time. vi. The resultant change in shareholding on account of the allotment indicated at paragraph (ii) above, will increase the concentration of the Proposed Acquirer/Promoter/ Government shareholding in the Target Company by 12.19% (gross increase of 20.70%) during the Financial Year 2017–18 i.e. more than 5%, thereby attracting the provisions of Regulation 3(2) of the Takeover Regulations. vii. 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/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/Promoter is stated to enable the Target Company to meet regulatory capital norms and will also provide the Target Company with additional leverage for raising further equity capital at a later date, as and when the need arises. 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 India, from complying with the requirements of Regulation 3(2) of the Takeover Regulations with respect to the proposed acquisition of 12.19% equity shares in the Target Company viz. Dena Bank during the Financial Year 2017–18, 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 India/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 by the Proposed Acquirer/Promoter are true and correct. iv. The public shareholding in the Bank shall be increased to 25% to comply with minimum public shareholding requirements in terms of Securities Contracts (Regulation) Rules, 1957, as undertaken. 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 and the Listing Agreement/SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. 3.4 The Application dated March 03, 2018 and revised Application dated March 23, 2018 filed by Target Company on behalf of the Proposed Acquirer/Promoter, 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: March 27, 2018 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA