September 5, 2021 2:31:39 am
The Reserve Bank of India (RBI) has allowed the government of Jammu & Kashmir to acquire over 16.76 crore shares in Jammu & Kashmir Bank on a preferential basis. The J&K government’s equity stake will rise to 74.24 per cent in the bank after the allotment. The issue follows a recent decision of the J&K government to transfer 8.23 per cent stake in the bank to the Union Territory of Ladakh.
“The RBI vide its letter dated September 2, 2021, has accorded approval to government of Jammu & Kashmir to acquire 16,76,72,702 fully paid-up equity shares on preferential basis, i.e., up to 74.24 per cent of the post issue paid-up voting equity capital of the bank subject to compliance of regulatory requirements,” J&K Bank said in a filing with stock exchanges on Friday.
Earlier this week, the bank’s board approved a fund raise of up to Rs 2,000 crore through a mix of debt and equity. This includes raising of equity share capital up to Rs 1,000 crore in one or more tranches and another Rs 1,000 crore by way of non-convertible Tier-2 bonds in the nature of debentures on a private placement basis. LIC and East Bridge Capital Master Fund hold around 2 per cent stake each in the bank.
In August, the lender had said that the Securities and Exchange Board of India (Sebi) had exempted the Jammu & Kashmir government from complying with its norms on substantial acquisition of shares and takeovers in the proposed acquisition during 2021-22.
The government of Jammu & Kashmir is infusing equity capital up to Rs 500 crore. The bank will allot 16,76,72,702 equity shares at Rs 29.82 a piece. Post the preferential allotment, the Union Territory government’s shareholding will increase from 68.18 per cent to 74.24 per cent. Since the change in shareholding by 6.06 per cent is in excess of 5 per cent of the equity paid up capital of the bank, it attracted the provision of the Takeover Regulation, necessitating a Sebi exemption.
J&K Bank is the only bank in India where the Union Territory (earlier state government) government holds a majority stake.
As per the Jammu and Kashmir Reorganisation Act 2019, the Central government has planned the apportionment of assets and liabilities of the erstwhile state of Jammu and Kashmir between newly-created Union Territories of J&K and Ladakh.
Earlier in July, the RBI had accorded its approval to the Government of the Union Territory (UT) of Ladakh to acquire 8.23 per cent of the paid-up equity capital of J&K Bank as on the date of enforcement of Jammu and Kashmir Reorganisation Act, 2019 (October 31, 2019). The move followed the Government of Jammu and Kashmir’s order on October 30, 2020, regarding the transfer of 8.23 per cent shareholding (about 4.58 crore equity shares) in J&K Bank as of October 31, 2019, to the UT of Ladakh.
Earlier this year, the Anti Corruption Bureau (ACB) arrested Parvez Ahmad Nengroo, former Chairman and Managing Director of J&K Bank, who was removed from the post in connection with alleged illegal allotment of tenders for housekeeping that led to loss of crores of rupees to the bank.
During FY20, the bank had issued and allotted 15,65,92,546 equity shares on preferential basis to the government of Jammu and Kashmir, the promoter of the bank, for cash at a price of Rs 31.93 per equity share — including a premium of Rs 30.93 per share — after obtaining the necessary statutory and regulatory approvals. Overall, the bank’s advances increased by almost 4 per cent from Rs 64,399 crore to Rs 66,842 crore, while the deposits rose 10.50 per cent from Rs 97,788 crore to Rs 108,061 crore during the year ended March 2021.
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