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SEBI consent order paves the way for RBL Bank’s IPO

02 June, 2016

The capital markets regulator Securities and Exchange Board of India (SEBI) has agreed to settle an outstanding case against RBL Bank Ltd (formerly Ratnakar Bank Ltd) for violation of disclosure norms related to issue of shares worth over Rs 600 crore to select investors.

The development is expected to pave the way for the long-pending IPO of the bank.

Under its consent mechanism, SEBI has accepted the settlement offer and decided to dispose the proceedings initiated against the private equity-backed bank. Under the consent mechanism, entities can seek to settle cases with SEBI after payment of certain fee and other expenses without admission of guilt.

The lender has agreed to make a nominal payment of Rs 47.6 lakh towards ‘monetary settlement charges’. The bank has also agreed to give an exit opportunity in its proposed IPO to the investors to whom shares were issued earlier unders rights and preferential issues.

However, none of those investors opted for the exit route as per the pricing formula.

The offer was to sell shares at the allotment price plus interest at the rate of 15%, or a fair value estimated by RBL of Rs 90 each.

The shareholders were given 21 days to decide on whether to sell their shares or continue to remain invested.

SEBI had asked the bank to resolve the issue of past violations of the Companies Act, wherein it had issued securities to a higher number of subscribers than permitted under the Act.

It may be noted that the bank had issued shares under rights issue and preferential allotment to over 49 investors, making it a public issue technically, in violation of the norms.

Initially, it made four preferential allotments of 18.19 lakh shares to a total of 4,892 investors to raise Rs 18.18 crore. It had also raised Rs 601.12 crore from 12,285 investors through issuance of shares on a rights basis in five instances.

Since the number of investors in each rights issue was in excess of 49, the bank was asked to follow SEBI norms on issue of capital and disclosure requirements.

RBL, which is backed by several private equity firms, had in June last year applied for raising up to Rs 1,100 crore ($162 million) through a fresh issue of shares in addition to an offer for sale by some shareholders.

The proposed IPO would have led to a complete exit for one of its private equity investors, Beacon India Private Equity Fund. The company, which counts several other PE shareholders, also planned to provide a part-exit to Gaja Capital and Capvent as part of the offer for sale.

As of May 27, SEBI was yet to give a formal nod to the IPO.

It is one of the two private banks that were eyeing a public float. Catholic Syrian Bank has already got clearance from SEBI for the IPO.

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SEBI consent order paves the way for RBL Bank’s IPO

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