IDBI Bank among 5 institutional shareholders keen to offload stake in CARE

In a development concerning the credit rating industry, some of the key institutional shareholders of rating agency Credit Analysis and Research Ltd (CARE) plan to sell their stake in the company.

It is, however, not clear whether they plan to dilute their entire stake or intend to hold part of their stake in the company, which came out with a public issue in the last fiscal year (2012-13).

However, as a precautionary step, CARE’s board of directors has proposed to increase the FII stake in the company to 74 per cent. At present, the FII holding in CARE is less than 14 per cent.

In a communication to the stock exchanges today, Credit Analysis and Research Ltd said IDBI had communicated to it that the company, along with four other shareholders, who together hold more than 45 per cent stake in CARE, were “in the process of identifying a buyer for the potential sale of 1,11,29,492 shares in the company”. The communication did not mention who the other four shareholders planning to sell/pare their stake in CARE are.

CARE said it has been apprised that the shortlisted bidders had been asked to submit their bids by February 25. But the sellers had reserved their right to “modify or abort the sale process” at any stage and the sale was subject to execution of a mutually agreed contract and to necessary approvals.

It is not clear who the other prospective sellers in CARE could be. While IDBI Bank held 16.69 per cent stake in the rating agency’s equity, Canara Bank held 13.25 per cent stake as at the end of December 31. SBI, with 6.31 per cent stake in the equity, was another bank to have a significant stake in the company. Institutional investors held 63.68 per cent stake in the company’s equity as at the end of the last quarter. Federal Bank, IL&FS Financial Services, Bajaj Holding, and Aditya Birla Private Equity Trust are among the significant stakeholders in CARE.

Probably to meet the emerging situation, the CARE board has approved raising the cap on foreign institutional investors’ investment limit in its equity to 74 per cent.

In its filings with the stock exchanges today, CARE said the proposal to hike the FII investment limit would include their sub-accounts in the shares or convertible debentures of the company by subscription or acquisition up to 74 per cent of the paid-up capital or paid-up value of each series of convertible debentures of the company as may be applicable.

The CARE stock was trading up Rs 33.65 at Rs 801 on the BSE at about 12 noon. CARE’s IPO in late 2012, which was to raise Rs 540 crore, garnered bids valued around Rs 19,000 crore. On listing, the share opened at Rs 940, at a premium of 26.53 per cent to the issue price of Rs 750. Incidentally, CARE was one of the two successful IPOs that year, the other being Multi Commodity Exchange.

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