The Securities and Exchange Board of India (SEBI) has exempted the Central Government from the open offer obligation, which would get triggered when the Government picks up 5.767 per cent stake in United Bank of India.

The Bank plans to allot over 18 crore shares for about Rs 700 crore at Rs 38.88 a share to the Centre on a preferential basis.

SEBI norm According to SEBI norms, when entities which hold 25 per cent or more equity in a company acquire an additional five per cent or more in it, they have to make an open offer to the public shareholders of the company.

In this case, SEBI has given the exemption on the ground that the infusion of capital is being done to comply with the Basel 3 Tier-1 capital adequacy norm of 8 per cent. As on March 31, United Bank’s Tier-1 capital under Basel 3 stood at 7.61 per cent.

SEBI said that higher capital adequacy indicates that a bank or a financial institution has sufficient capital to tide over difficult times and to protect the interests of its depositors and, in turn, the economy.

Even after the proposed increase in shareholding of the Government in the company, the minimum public shareholding of 10 per cent required in public sector undertakings as stipulated in the Securities Contracts (Regulation) Rules would be maintained. Further, there would be no change in management control.

Limited to need The exemption is only limited to the requirements of making an open offer in accordance with regulations.

Earlier, on November 6, United Bank had filed an application with SEBI, on behalf of the Government, seeking exemption from making an open offer.

On Wednesday, United Bank of India shares closed 0.60 per cent down at Rs 33.30 on the BSE.

>raghavendrarao.k@thehindu.co.in

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