Event Date: N/A
September 20, 2024, Utkarsh Small Finance Bank Limited (USFBL) convened a board meeting where they approved the scheme of amalgamation ("Scheme") of Utkarsh CoreInvest Limited ("Transferor Company" or “UCL”) with USFBL ("Transferee Company") and their respective shareholders, pursuant to Sections 230 to 232 of the Companies Act, 2013. The approval is based on recommendations from the Audit Committee and Independent Directors of USFBL.
The effectiveness of the Scheme is conditional and subject to several approvals and conditions, including: Reserve Bank of India (RBI) approval per Chapter IV, Paragraph 14 of the RBI Amalgamation Directions and Section 44(B)(1) of the Banking Regulation Act, 1949; no-objection letter from stock exchanges per SEBI regulations; approvals from other relevant governmental authorities; expiry of the lock-in restriction on 21,97,52,029 equity shares held by the Transferor Company in the Transferee Company on January 19, 2025, as per SEBI regulations; approvals from requisite majorities of shareholders and creditors of both companies as prescribed under applicable law and directed by the National Company Law Tribunal (NCLT), Allahabad bench; approval by e-voting by the requisite majority of public shareholders of the Transferee Company as required under SEBI circulars; approval by e-voting by the requisite majority of debenture holders of the Transferee Company as required under SEBI circulars; sanction by the NCLT or other competent authority; filing the NCLT order with the Registrar of Companies; fulfillment of any compliance requirements stipulated by the RBI, stock exchanges, and/or other governmental authorities; and the required government sanctions or approvals for related matters.
The Appointed Date defined in the Scheme is April 1, 2025, or another mutually agreed date by the boards or as approved by the NCLT. The share exchange ratio is 699 equity shares of USFBL (INR 10 each) for every 100 equity shares of UCL (INR 10 each).
USFBL also approved raising funds by issuing Tier II Capital aggregating up to Rs. 200 crores through Non-Convertible Debentures (NCDs), within the borrowing limits as per Section 180(1)(c) of the Companies Act, 2013. Mr. Govind Singh, Managing Director & CEO, is authorized to determine materiality of events and information for disclosure, along with Mr. Sarju Simaria, Chief Financial Officer, and Mr. Muthiah Ganapathy, Company Secretary.
The board took on record the RBI letter dated September 19, 2024, approving the appointment of Mr. Pramod Kumar Dubey (DIN: 10174154) as Whole Time Director (Additional) for a period of 3 years effective from September 20, 2024, subject to shareholder approval. Mr. Dubey is not debarred and is unrelated to any existing director. A postal ballot notice was approved for his appointment and remuneration.
The resignation of Mr. Chandra Shekhar Thanvi (DIN: 00563531), Nominee Director from Small Industries Development Bank of India (SIDBI), due to superannuation, was recorded. The resignation of Mr. Trilok Nath Shukla, Head Micro Banking (Senior Management Personnel) of the Bank, was also noted. The Board Meeting commenced at 3:00 pm and concluded at 9:50 pm.
Annexure-1: Details Related to the Amalgamation Scheme
The Scheme contemplates the amalgamation of Utkarsh CoreInvest Limited into Utkarsh Small Finance Bank Limited. As of June 30, 2024, the details of assets, turnover and net-worth of the Transferor Company (Utkarsh CoreInvest Limited) and Transferee Company (Utkarsh Small Finance Bank Limited) are provided:
The proposed amalgamation would fall within related party transactions under the Listing Regulations; however, compliance with Section 188 of the Companies Act will not be required, based on clarifications from the Ministry of Corporate Affairs. The share exchange ratio is based on a valuation report by RBSA Valuation Advisors LLP dated September 20, 2024, and a fairness opinion from DAM Capital Advisors Limited dated September 20, 2024. The joint statutory auditors of the Transferee Company confirmed the accounting treatment's conformity with accounting standards and RBI guidelines. The Audit Committee and Independent Directors of USFBL have recommended the Scheme.
Utkarsh CoreInvest Limited is a Non-Banking Financial Company, an investment company which holds the Transferee Company as its only subsidiary, with 69.02% ownership as of June 2024. Utkarsh Small Finance Bank Limited provides a range of banking and financial services with a focus on micro-finance and lending to small businesses.
The rationale for the amalgamation is to comply with Small Finance Bank (SFB) Guidelines and RBI Clarifications, which require the promoter to reduce its equity shareholding in the small finance bank to 40% within 5 years and to 26% within 15 years from the start of business operations. The RBI allowed the amalgamation of a holding company into the small finance bank as a mode of achieving such exit for the first time through letter dated July 9, 2021. USFBL submitted a dilution plan to the RBI on December 28, 2023 which included the option of a reverse merger.
The benefits of the amalgamation include complying with RBI mandated dilution requirements, creating value for stakeholders by simplifying the group structure, reducing compliance, and optimizing resource utilization. The Transferor Company carries on financial activity in the nature of investments, and its shareholders will receive shares of a listed company. This Scheme will be beneficial and not prejudicial to the interests of stakeholders, and the board of directors have formulated this Scheme.
The share exchange ratio is 699 equity shares of USFBL for every 100 equity shares of UCL. Upon the Scheme becoming effective, Utkarsh Small Finance Bank Limited will issue equity shares based on this ratio. Since Transferor Company has no identifiable promoter and all its shareholders are public shareholders, the issue of shares will increase public shareholding in USFBL from 30.98% as on June 2024 to 100%.
Annexure-2: Details Related to Director Appointments and Resignations
Mr. Pramod Kumar Dubey has been appointed as Additional Whole Time Director (Executive) in compliance with RBI circular number RBI/2023-24/70 for a period of 3 years, subject to approval from shareholders. His appointment is effective from September 20, 2024. Mr. Dubey has over 26 years of experience in the banking industry, holds a Master of International Business Administration, and previously served as the Head of Operations at ICICI Bank. He has served as an observer on the Board of Midland Microfin Limited.
Mr. Chandra Shekhar Thanvi's resignation as SIDBI Nominee Director has been completed. There are no disclosures of relationships between directors.
Annexure-3:
Contains the resignation letter from Chandra Shekhar Thanvi, stepping down from the directorship on the Board of Utkarsh Small Finance Bank due to superannuation from SIDBI.
Annexure-4:
Mr. Trilok Nath Shukla, Head Micro Banking (Senior Management Personnel), resigned from his position, effective September 20, 2024.
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