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

WTM/GM/CFD/104/2017–2018 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 BANK OF BARODA ACQUIRER GOVERNMENT OF INDIA

BACKGROUND – 1.1 Bank of Baroda (“Target Company”) is a Scheduled Commercial Bank having its Corporate Office at Baroda Corporate Centre, C – 26, G Block, Bandra Kurla Complex, Bandra East, Mumbai– 400051. The Target Company was incorporated on July 20, 1908. 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 20, 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”).

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 Bank of Baroda

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 and the e–mail dated February 26, 2018 and 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 ₹5375 Crores.

B. At the Board Meeting of the Target Company held on February 9, 2018, the Board of Directors approved raising of additional equity capital to the extent of ₹5375 Crores 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 was held on March 13, 2018, for obtaining the requisite approval/special resolution for the proposed acquisition. The aforesaid approval was obtained on that date.

D. The Target Company has decided to issue 34,13,56,534 equity shares of face value ₹2 each (aggregating ₹5375 Crores) to the Proposed Acquirer/Promoter, at an issue price of ₹157.46 as determined under Regulation 76(1) of the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (“ICDR Regulations”).

E. The shareholding pattern in the Target Company as on (i) January 1, 2018 i.e. prior to the proposed acquisition and (ii) subsequent to the proposed acquisition, is provided as under –

TABLE I – SHAREHOLDING IN THE TARGET COMPANY (SOURCE: APPLICATION) CATEGORY AS ON 01.01.2018 PROPOSED SUBSEQUENT TO PRIOR TO ACQUISITION PROPOSED PROPOSED ALLOTMENT ALLOTMENT NO. OF SHARES NO. OF SHARES NO. OF SHARES AND % AND % AND % A. PROMOTER AND PROMOTER 135,24,90,612 34,13,56,534 169,38,47,146 GROUP [58.70%] [5.33%] [64.03%] B. PUBLIC SHAREHOLDING 95,16,68,986 – 95,16,68,986 [41.30%] [35.97%] C. GRAND TOTAL (A + B) 230,41,59,598 – 264,55,16,132 [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. RAVI VENKATESAN CHAIRMAN, NON–EXECUTIVE DIRECTOR 2. P. S. JAYAKUMAR MANAGING DIRECTOR & CHIEF EXECUTIVE OFFICER, EXECUTIVE DIRECTOR 3. MAYANK K. MEHTA EXECUTIVE DIRECTOR 4. ASHOK KUMAR GARG EXECUTIVE DIRECTOR 5. PAPIA SENGUPTA EXECUTIVE DIRECTOR 6. LOK RANJAN NON–EXECUTIVE DIRECTOR - GOI NOMINEE 7. AJAY KUMAR NON–EXECUTIVE DIRECTOR - RBI NOMINEE 8. BIJU VARKKEY NON–EXECUTIVE DIRECTOR - NOMINEE 9. GOPAL KRISHAN AGARWAL NON–EXECUTIVE DIRECTOR - NOMINEE 10. USHA A. NARAYANAN NON–EXECUTIVE DIRECTOR - INDEPENDENT 11. SOUNDARA KUMAR NON–EXECUTIVE DIRECTOR - INDEPENDENT 12. BHARATKUMAR D DANGAR NON–EXECUTIVE DIRECTOR - INDEPENDENT

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.

From the Application filed on behalf of the Proposed Acquirer/Promoter and the e–mail dated February 26, 2018 as submitted by the Target Company, the following is observed – a. “The Government of India vide their letter F. No. 7/38/2014–BOA dated 24.01.2018 has decided infuse capital to the tune of ₹5375 Crores as growth capital in the Bank. The proposed issue will be by way of Preferential Allotment of equity shares in favour of the Government of India. b. The infusion of ₹5375 Crores over the remainder of the Financial Year 2017–18 and further capital infusion in FY 2018–19, is aimed at  Meeting regulatory capital norms, in terms of the minimum Common Equity Tier 1 (CET 1) and Capital Buffer requirements, subject to the Bank’s performance in carrying out the terms of this Undertaking to Government of India satisfaction, and  Augmenting growth capital for enhanced credit off – take – i. In FY 2017–18, and ii. In FY 2018–19, assuming such RWA growth as it is decided by the Department of Financial Services after discussion with the Bank, subject to the Bank’s performance in carrying out the terms of this Undertaking to Government of India satisfaction. c. The Bank is conducting an Extraordinary General Meeting for seeking approval of the Members for the proposed (Preferential Allotment) of upto 34,13,56,534 equity shares at a price of Rs. 157.46 per share aggregating Rs. 5375 Crores by way of Special Resolution. d. Post the Preferential Allotment, Government of India’s shareholding (Promoter) will increase from 58.70% (as on date) to 64.03% (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 provisions of Regulation 3(2) of the Takeover Regulations. e. Thus … the application is being preferred.”

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 of page 3, it is observed that as on January 1, 2018, the Proposed Acquirer/Promoter i.e. the Government of India, held 135,24,90,612 (58.70%) equity shares in the Target Company.

ii. Subsequent to the proposed acquisition indicated at Table I of page 3 i.e. preferential allotment of 34,13,56,534 equity shares, the Proposed Acquirer/Promoter will hold 169,38,47,146 (64.03%) equity shares in the Target Company. Consequently, the public shareholding in the Target Company will decrease from 41.30% to 35.97%.

iii. 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 5.33% during the Financial Year 2017–18 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/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 5.33% equity shares in the Target Company viz. Bank of Baroda 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.

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 February 20, 2018, filed by Target Company on behalf of the Proposed Acquirer/Promoter, is accordingly disposed of.

Place: Mumbai G. MAHALINGAM Date: March 19, 2018 WHOLE TIME MEMBER SECURITIES AND EXCHANGE BOARD OF INDIA