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This is an archive article published on December 30, 1999

Shareholders question HDFC Bank pref offer

AHMEDABAD/MUMBAI, DECEMBER 29: The amalgamation of HDFC Bank and Times Bank has run into rough whether with two shareholders of HDFC Bank ...

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AHMEDABAD/MUMBAI, DECEMBER 29: The amalgamation of HDFC Bank and Times Bank has run into rough whether with two shareholders of HDFC Bank filing a civil suit objecting to a preferential issue to main institutional shareholders to ensure that their stake in the bank remains unchanged after the amalgamation of Times Bank with it.

HDFC Bank has called an extraordinary general meeting (EGM) of its shareholders on January 1 to seek approval to a resolution for the preferential allotment.

HDFC has just over 29 per cent while the other two strategic partners together hold about 15 per cent equity in HDFC Bank. The merger has already come into effect from December 1. Under the proposed scheme, shareholders of TimesBank will receive one share of HDFC Bank for every 5.75 shares of TimesBank. The 1:5.75 swap ratio between the shares of the two banks has been endorsed by consulting firm KPMG.

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Seeking shareholders’ approval, TimesBank has decided to call for extraordinary general meeting (EGM) on January 7, 2000after the January 1, 2000 EGM of HDFC Bank. TimesBank will be merged with HDFC Bank under section 44A of the Banking Regulation Act, which means that a High Court approval is not required, Chairman of HDFC, Deepak Parekh had said in the news conference to announce the merger.

The merged entity will be known as HDFC Bank, while the licence issued to TimesBank will be extinguished or surrendered to the Reserve Bank of India.

As per the deal, 23.48 million shares of HDFC bank will be given to the shareholders of TimesBank. Of these, the Bennett Coleman group will get 17.43 million shares while public shareholders of TimesBank will be given 6.09 million shares. HDFC Bank will pay an acquisition premium of about 11 per cent to the shareholders of TimesBank, Parekh said. TimesBank shareholders will hold about 10 per cent stake in the merged bank, in which the Bennett Coleman group will have about 7.7 per cent.

HDFC Bank had decided to make a preferential issue to its shareholders so that their stakes remainunchanged after the merger. Accordingly, 1,33,10,00 equity shares of face value Rs 10 will be issued to HDFC Ltd or a wholly-owned susbisdiary of HDFC Ltd at a price of Rs 94 per share. Further, 13,70,000 shares and 51,20,000 equity shares of face value Rs 10 at Rs 94 per share is to be issued to the India Private Equity Fund and Indocean Financial Holdings Ltd, respectively.

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Additionally, the HDFC Bank board has also resolved to issue — subject to regulatory approval — 1,00,00,000 fresh shares of Rs 10 each in terms of employee stock option Plan in accordance with Sebi guidelines.

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