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Business News/ Market / Stock-market-news/  RBL Bank’s IPO not to benefit from new relaxed norms announced by Sebi
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RBL Bank’s IPO not to benefit from new relaxed norms announced by Sebi

RBL Bank's planned IPO is expected to continue to face challenges as the company has in the past issued shares to more than 200 people in a single offer

RBL Bank has hired nine investment banks to run the share sale process. The IPO would help the bank comply with the RBI guidelines issued last year that directed all banks to list within three years of starting business. Photo: Ramesh Pathania/Mint Premium
RBL Bank has hired nine investment banks to run the share sale process. The IPO would help the bank comply with the RBI guidelines issued last year that directed all banks to list within three years of starting business. Photo: Ramesh Pathania/Mint

Mumbai: Capital markets regulator Securities and Exchange Board of India (Sebi) on Monday relaxed listing rules for companies, which have issued shares to over 49 subscribers (but less than 200) in a fiscal year. However, even with the relaxed norms, RBL Bank Ltd’s planned initial public offering (IPO) is expected to continue to face challenges as the company has in the past issued shares to more than 200 people in a single offer.

RBL had filed its draft IPO papers with Sebi on 26 June and is still waiting for the regulator’s approval.

On Monday, Sebi said that after 1 April 2014, any offer or allotment of securities shall be considered as public issue if the number of allottees exceeds 200 persons in a fiscal year under the Companies Act 2013 as against the cap of 49 persons provided in the Companies Act 1956.

It also announced corrective procedure for companies, which have issued shares to more than 49 people in the past.

“The Board has approved that in respect of the cases involving issuance of securities to more than 49 persons but up to 200 persons in a fiscal year, the companies may avoid penal action if they had provided the investors with an option to surrender the securities and get the refund amount at a price not less than the amount of subscription money paid alongwith 15% interest per annum thereon," Sebi said.

In its draft red herring prospectus (DRHP) filed with Sebi, RBL Bank has disclosed that in years 2003 and 2006, it issued shares to more than 200 subscribers. These issuances by RBL still stand non-compliant under the new relaxed rules.

“The way the Sebi press release states it, only if the allotment was up to 200, it can be rectified through the procedure mentioned. However, RBL had instances of more than 200 new allotments also and that will continue to be a non-compliance," said an investment banker involved in the RBL issuance, requesting anonymity.

This is a dampener for the RBL issue as Sebi has given no clarification for companies which have issued shares to more than 200 people, he added.

However, another banker said that RBL’s is a unique case and that one needs to wait for more clarity from Sebi on the issue.

“RBL is a different case as the Reserve Bank of India (RBI) is pushing for the company to list. Also, the current management team was not even involved when these incidents happened," said another banker involved in the issuance, also requesting anonymity, adding that Sebi will have to factor in these points when looking at the RBL issuance.

“The news of increase in cap was long awaited; however, it is not relevant to us," said Vishwavir Ahuja, managing director and chief executive at RBL Bank, while declining to comment on the status of RBL’s IPO approval.

The bank has hired nine investment banks to run the share sale process. The IPO would help the bank comply with the RBI guidelines issued last year that directed all banks to list within three years of starting business.

Over the last three years, global and local private equity and development funds have invested over 1,400 crore in the bank in three tranches. Housing Development Finance Corp. Ltd (HDFC), Norwest Venture Partners, Samara Capital, Beacon Capital, Faering Capital, TVS Shriram, Cartica Capital, Ascent Capital, Aditya Birla Private Equity, IDFC’s Spice Fund and ICICI’s Emerging India Fund are among its shareholders.

Though RBL is an old private sector bank established in 1943, it has grown fast under a new management, led by managing director and chief executive officer Ahuja since 2010. In the last three years, the bank has shed its regional image, opened branches and attracted new investors.

The share sale will make RBL the 41st publicly traded bank in India.

Bankers added that the relaxed norms will help other firms such as healthcare company Thyrocare Technologies Ltd, which had issued shares to 51 people in 2005. In May, Mint reported that Thyrocare’s IPO plans were stuck as it was awaiting clarity from the regulator on this issue.

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ABOUT THE AUTHOR
Swaraj Singh Dhanjal
" Based in Mumbai, Swaraj Singh Dhanjal is responsible for Mint’s corporate news coverage. For the past eight years he has been writing on the biggest deals in private equity, venture capital, IPO market and corporate mergers and acquisitions. An engineer and an MBA, he started his journalism career in 2014 with Mint. "
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Published: 01 Dec 2015, 11:40 AM IST
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