Ujjivan Financial Services Ltd (Ujjivan) on Saturday said its board has approved amalgamation of the company with its subsidiary Ujjivan Small Finance Bank (UFB) in order to comply with the Securities and Exchange Board of India's (SEBI) minimum public shareholding norms.

The decision was taken based on the recommendation of the audit committee and committee of independent directors in a meeting held on Saturday, Ujjivan said in a regulatory filing.

As per the scheme of amalgamation, Ujjivan Financial Services (transferor company) will be merged with Ujjivan Small Finance Bank (transferee company), and the dissolution is to be without the winding-up of the transferor company. The amalgamation is subject to approval from the Reserve Bank of India (RBI), capital markets regulator SEBI, public shareholders of the companies involved, as well as the National Company Law Tribunal (NCLT).

Ujjivan is the holding company and promoter of Ujjivan Small Finance Bank (SFB).

Ujjivan currently holds 83.32 per cent of the equity shareholding and 100 per cent of preference shareholding of Ujjivan SFB.

As per the minimum shareholding norms, the promoter's minimum initial contribution in the SFB arm should be at least 40 per cent. If the promoter's initial shareholding in the SFB is in excess of 40 per cent, then it is to be brought down to 40 per cent within a period of five years from the date of commencement of operations of SFB.

"The aforesaid period of five years is expiring on January 31, 2022 for the transferee company (being SFB), and the proposed amalgamation among other business objectives and benefits would enable the transferee company to ensure the aforesaid compliance," Ujjivan said.

Once the scheme comes into effect, Ujjivan SFB would issue and allot to the shareholders of Ujjivan Financial Services 115 equity shares of the bank for every 10 equity shares of Ujjivan.

Ujjivan said the amalgamation would result in the formation of a larger and stronger entity having greater capacity for conducting its operations more efficiently and competitively. It will also lead to better administration and cost reduction, it added.

(Edited by : Thomas Abraham)