The bank has given notice for the Extra Ordinary General (EGM) meeting to the members of Suryoday Small Finance Bank Limited (“ the Bank”) which is to be held on Tuesday, November 5, 2019, at the registered office Navi Mumbai 400614 at 11.30 a.m. to transact the following business:
(i) Increase in the limits of investment by NRIs to 24% of the paid-up share capital of the Bank.
(ii) Alteration of Clause 3(xx) of Part A and Clause 1(lix) of Part B of the Articles of Association of the Bank.
The clause (ii) is of less importance as far as retail investors are concerned. It is related to changing shareholding from one of the promoters to family members.
“One of the Promoters has indicated his desire to transfer his shareholdings to his family members who will continue to hold the shares subject to the conditions imposed by the RBI on shares held by the Promoter. While the necessary applications have been submitted to the Reserve Bank of India for its consideration, it is proposed to alter the definition of ‘Promoters’ to allow the concerned transferees to hold shares as Promoters of the Company in case the RBI permits them to do so”
The clause (i) is important for us as it indicates that NRIs are interested in purchasing shares of the bank. As per the shareholding pattern of the Bank as on September 30, 2019, foreign shareholding in the Bank is 43.89% and the aggregate NRI holdings (on the non-repatriation basis) in the Bank’s paid-up capital is 16.67%.
As per FEMA, a private sector banking company is permitted to have Foreign Direct Investment up to 49% of its paid-up share capital under the Automatic route and up to 74% with Government approval. Further, in the case of NRI holdings, whether on repatriable or on a non-repatriable basis, the individual holdings are restricted to 5% of the total paid-up share capital of the Bank and the aggregate limit restricted to 10% of the total paid-up share capital of the Bank.
As a research team, we would be like to see at what valuation the bank will issue shares to NRI.
Thanks for reading!!
We will update once the EGM’s outcome or any funds raising news comes.