The Hindu Business Line : BNP Paribas seeks Centre’s nod for Geojit open offer

Mumbai, Dec. 23 The French banking group BNP Paribas has approached the Union Government seeking regulatory clearance for its open offer to shareholders of Kerala-based broking firm Geojit Financial Services Ltd.

According to reports, BNP, which had bought 27 per cent equity shares in Geojit in March this year, could not go ahead with the mandatory open offer pending clearance from the Reserve Bank of India.

The central bank, it is learnt, is of the view that since Geojit is also engaged in commodity trading, BNP as a bank operating in India cannot own that company. As per the prevailing rules, banks in India are not allowed to enter commodity trading. Geojit has a wholly owned subsidiary doing futures trading in commodities.

Mr Frederic Amoudru, BNP’s Country Manager for India, said he is hopeful of getting the regulatory approval soon. “We (BNP and Geojit) have jointly approached RBI and are hopeful of a positive outcome soon,” he told Business Line.

Policy nuances

However, according to a merchant-banking source, the French bank, along with Geojit, has approached the Union government as RBI had sought Government clarification on the policy issue. BNP had acquired 27 per cent stake through the automatic route, which does not require any prior regulatory approval.

Being a listed company and also a commodity trader, it had obtained clearance from SEBI, Forward Markets Commission and stock exchanges. The question of RBI clearance came only at the time of making the open offer, the source said.

Mr C.J. George, Managing Director, Geojit, said the company had complied with all regulatory requirements. “We hope that the issue will be resolved soon,” he said.

BNP had acquired 27.18 per cent equity in Geojit at a price of Rs 26 per share through a preferential allotment in March. The bank was also issued 2.28 crore warrants which can be converted into shares within 18 months. After conversion, BNP’s stake in Geojit will go up to 34 per cent.

Immediately after acquiring 27 per cent stake, BNP had approached SEBI for the mandatory 20 per cent open offer. BNP being a foreign bank operating in India, the capital market regulator had referred the open offer to RBI for clearance. Since then, BNP has been waiting to announce the open offer.

As the matter stands now, BNP, though being the single largest shareholder in Geoijt, has no official representation on its board. Since Geojit is a listed company, SEBI cannot approve the deal without BNP completing the mandatory open offer. Interestingly, going for an open offer will now be costly for BNP as Geojit share price has more than doubled in the last six months. The Re 1 share closed Rs 81.20 on BSE on Thursday.

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