The board of directors of Ujjivan Financial Services has approved the merger of the company with its subsidiary, Ujjivan Small Finance Bank, to meet SEBI’s minimum public shareholding standards.
Ujjivan Finance Services currently owns 83.32 percent of the total paid-up share capital of Ujjivan SFB.
“Accordingly, the program, if implemented, will result in an increase in the shareholding of public shareholders of the transferee company from 16.68% to 100%, subject to receipt of the required approvals,” said Ujjivan Financial Services in a stock market file.
SEBI, RBI approval
The merger scheme is subject to the approval of the Reserve Bank of India, SEBI, NCLT and the public shareholders of the company.
According to RBI standards, the promoter’s minimum initial contribution to SFB’s paid-up share capital must be at least 40 percent, which must be blocked for a period of five years from the date of commencement of SFB operations. In addition, if the promoters’ initial stake in SFB is greater than 40 percent, then it must be reduced to 40 percent within five years from the date of commencement of SFB’s operations.
In Ujjivan SFB’s case, the five-year period expires on January 31, 2022, and the proposed merger among other business goals and benefits will enable it to ensure compliance, Ujjivan Financial Services added.
“The merger complies with the conditions prescribed in the SFB guidelines and will result in the formation of a larger and stronger entity with a greater capacity to conduct its operations in a more efficient and competitive manner; the merger will avoid the operational inefficiency of the group by operating a single listed entity and create synergies, ”said Ujjivan.