The Hindu Business Line : South Indian Bank studying options to raise fresh capital

In an interview to Business Line, Mr A. Sethumadhavan, Chairman and CEO, SIB, indicated that the bank was studying various routes available to power its growth, both organically by expanding its reach and inorganically by acquiring another bank. But SIB will continue to maintain its identity.

It had floated a rights issue some months ago that was over-subscribed. The bank has not decided whether it should opt for an IPO to raise capital and is looking at options such as private placement, raising tier-two capital and rights issue, he said.

The GDR option was there, but it might be a `little bit difficult', he added.

"Basically we would like to raise the money from the domestic market," he said.

He said ICICI Bank, with 11.5 per cent equity holding, was the single largest shareholder in SIB and the total institutional shareholding was around 17 per cent. (The rest of the shareholding is widely distributed, with the share of retail investors being around 65 per cent.) He said the bank had the manoeuvrability to raise resources through `any route' and within a month perhaps things might take a `better shape' as to what exactly the bank intended to do to shore up its capital.

Mr Sethumadhavan said the bank might have to raise resources in two tranches to reach the Rs 1,000-crore target. As of now, the bank's capital adequacy ratio was above 11 per cent. . Since SIB was a traditional bank with a long history, it could look at inorganic growth only if there was `clear synergy in functioning'- in systems and procedures and style of functioning.

Asked whether there was enough space for small private sector banks to survive when even big PSU banks were looking at mergers, the SIB Chairman said his bank had much higher net worth than the minimum prescribed by the RBI. On the financial performance, he admitted that all banks had to take a knock this year due to the drop in treasury income.

The bank had shown profit in the quarter ended December 2004 and the figures for the last quarter of the current fiscal will be much better, he said.

Asked about the impact of any off-loading of its stake in SIB by ICICI Bank, Mr Sethumadhavan said as per the RBI guidelines, inter-bank holdings could not exceed 5 per cent and wherever it exceeded that limit, the bank concerned has to give a road-map to the RBI as to how it planned to pare the exposure and said, "I understand that ICICI Bank has given a plan to the RBI" on this issue.

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