Published on 10/12/2019 1:17:50 PM | Source: Live Mint

Why Bajaj Finance changed its investment route in to RBL Bank over the weekend

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MUMBAI : Mumbai: Last week Bajaj Finance Ltd, one of the largest consumer focused lenders in the country, made a Rs150 crore investment in RBL Bank Ltd through the latter's qualified institutional placement (QIP) offering. However, that was not Bajaj Finance's originally intended route of investment in RBL Bank.

On 30 November, RBL Bank, in a filing to the stock exchanges, said it will raise around Rs825 crore through preferential allotment of shares to a bunch of investors, including Bajaj Finance.

Bajaj Finance, according to the exchange notification, was supposed to subscribe to 4.4 million shares at a price of Rs340.7 apiece.

The proposed preferential allotment would have closed only after approval from the bank's shareholders at the extraordinary general meeting (EGM), scheduled for 27 December.

A 3 December notice to shareholders, informing about the EGM, however, did not list Bajaj Finance as one of the preferential allotment investors.

Between Saturday, 30 November, and Tuesday, 3 December, Bajaj Finance changed its plans to invest in the bank through the preferential allotment route to subscribing to shares through the QIP, which opened for subscription on 2 December.

According to two people aware of the developments, the change of plan was prompted by Securities and Exchange Board of India (Sebi) norms on preferential allotment, which would have made Bajaj Finance ineligible for participation.

"Sebi states that for strategic investors, such as Bajaj Finance, to be eligible for participation in a preferential allotment of shares, they should not have sold shares of the issuer company in the previous six months," said the first person cited above, requesting anonymity.

Bajaj Finance, through its various lending products such as loan against shares (LAS) was holding RBL Bank shares as pledge, the person said. "And when some of these loans saw defaults, Bajaj Finance invoked these pledges and sold the RBL Bank shares it was holding. This inadvertently made Bajaj Finance ineligible to participate in the proposed preferential allotment by RBL," he added.

Interestingly, Bajaj Finance seems to have stumbled upon this roadblock only after a public announcement of its intention to participate in the bank's preferential allotment of shares.

On Friday, RBL Bank announced that it had successfully raised Rs2,025 crore through its QIP offering by selling shares to institutional investors such as mutual funds, insurance companies and foreign institutional investors.

Bajaj Finance subscribed to 4.27 million shares at Rs351 apiece, aggregating to Rs150 crore in the QIP, according to filings to stock exchanges.

Emails sent to Bajaj Finance remained unanswered till the time of going to print.

Emails sent to Bajaj Finance did not elicit a response.