In order to fast track its initial public offering (IPO) process, Ratnakar Bank (RBL) plans to give the exit option to its existing shareholders via buyback offer next week. The move comes after Sebi provided conditional approval for the initial share sale of RBL and asked them to provide optional exit opportunity to the current investors who were allotted shares in breach of the Companies Act.
The buyback is expected to be completed in the coming week as the company plans to launch its IPO by the end of May, sources told FE. According to the Securities and Exchange Board of India (Sebi) Issue of Capital and Disclosures Regulations (ICDR), the approval for the share sale of RBL will lapse in June 2016.
Earlier, the market regulator had kept the draft prospectus of RBL in abeyance because of past violations. The transactions under scanner were the two rights issues the bank made previously. According to the Draft Red Herring Prospectus data, RBL allotted shares through a rights issue to 2,591 investors on February 19, 2003, and to 1,969 investors on March 13, 2006. As per the earlier Companies Act of 1956, an unlisted company wasn’t allowed to allot securities to more than 49 investors in a financial year. The act was subsequently amended in 2013 where the cap was raised to 200 investors. However, the rights issue of RBL amounted to violation even under the tweaked norms.
“We are just a step away from the IPO. Once the buyback process concludes, extinguishment certificates will be issued. Then we will approach Sebi for the final permission. The complete process will be done in about a month’s time,” said an investment banker who is a part of book running managers.
RBL plans to raise around Rs 2,000 crore from the primary markets, of which Rs 1,100 crore is a fresh issue. To ensure due diligence for the IPO, RBL had hired nine investment bankers, including Citi, Morgan Stanley and Kotak Investment Bank.