Ujjivan Financial Board approves merger with Ujjivan SFB. Check details of scheme

The proposed scheme contemplates the amalgamation of the transferor company into and with the transferee company and the dissolution without winding-up of the transferor company pursuant thereto. However, the proposed scheme is conditional and subject to the following:

(i) the approval of the Reserve Bank of India (RBI) in terms of RBI Master Directions – Amalgamation of Private Sector Banks, Directions, 2016 dated April 21, 2016, and RBI certification under Section 44(B)(1) of the Banking Regulation Act, 1949;

(ii) no-objection of BSE Limited and the National Stock Exchange of India Limited (NSE) and SEBI comments as per Regulation 37 and Regulation 94 of Listing Regulations read with SEBI Master Circular;

(iii) the scheme being approved by the requisite majority of each class of members and/or creditors (where applicable) of the transferor company and transferee company in accordance with the applicable laws and as may be directed by the National Company Law Tribunal, Bengaluru Bench (NCLT). Further, the scheme is conditional upon it being approved by the public shareholders through e-voting; the scheme shall be acted upon only if the vote cast by the public shareholders in favour of the proposal is more than the number of votes cast by the public shareholders against it;

(iv) the scheme having been sanctioned by the NCLT;

(v) fulfilment of any compliance(s), condition(s) etc., if any, stipulated by the RBI, SEBI, BSE, NSE and/or any other relevant governmental authority (as defined in the scheme) prior to effecting the scheme;

(vi) receipt of such other sanction(s), approval(s) etc., of any other Governmental Authority as may be required by Applicable Laws in respect of the Scheme; and

(vii) certified copy of the NCLT order sanctioning the Scheme being filed with the jurisdictional Registrar of Companies by both the Transferor Company and the Transferee Company.

Rationale for amalgamation /merger

Ujjivan SFB, which is a subsidiary of Ujjivan Financial and is registered with the RBI as a small finance bank, is engaged in the banking business with a focus on financially unserved and underserved segments.

Being an investment company, the main object of the transferor company is to carry on the business of making investments in the group company(ies). The transferor company presently has an investment in the transferee company where it holds 73.68 percent of the equity shareholding and 100 percent of preference shareholding and derives its value primarily from such investment. Ujjivan Financial has claimed to have no other business interest.

Further, the transferee company was issued a license by the RBI to operate as SFB in India on November 11, 2016. As per the conditions laid in the said license, the promoter of the SFB was required to reduce its equity stake in it to 40 percent, then to 30 percent, and then to 26 percent, within a period of five years, 10 years, and 12 years, respectively, from commencement of operations of the SFB.

Certain recommendations were also made with respect to the dilution of promoter shareholding by the Internal Working Group (IWG) constituted by the RBI to review the extant guidelines on ownership and corporate structure for Indian private sector banks. The RBI had on November 26, 2021, accepted the IWG’s recommendation with respect to dilution aspects of promoter shareholding in the private sector banks and clarified that the submission of a dilution schedule shall be mandatory.

Accordingly, the proposed amalgamation among other business objectives and benefits would enable meeting the aforesaid dilution requirements.