The Hindu Business Line : Promoters' stake: DCB to seek time for compliance

Development Credit Bank Ltd (DCB), the private sector bank promoted by the Aga Khan Fund for Economic Development (AKFED), is unlikely to comply with the Reserve Bank of India's stipulation on reducing promoter's holding before the deadline.

While permitting DCB to tap the capital market with its initial public offer (IPO), the RBI had directed AKFED to bring down its stake to 10 per cent or below within a year of listing or by March 31, 2007, from the existing level of 58.43 per cent.

"Following unfavourable market conditions, we could not tap the market with IPO. As a result, the approval we obtained from the Securities and Exchange Board of India (SEBI) has expired on August 7 this year. We have filed the draft prospectus again with SEBI and are expecting the approval by the month-end. We may go ahead with IPO sometime during the first half of September," the DCB Managing Director and CEO, Mr Gautam Vir, told Business Line.

IPO pricing

Owing to the current market conditions, DCB may have to go in for downward adjustments in pricing the IPO. As the total number of shares to be issued would remain unchanged, the bank would end up raising reduced funds through the IPO in view of downward revision in pricing, Mr Vir said.

Stating that the delay in tapping the market would not enable the bank to comply with the RBI directives on reducing the promoter's holding to 10 per cent or below, Mr Vir said the ensuing IPO would see the promoter's holding coming down to around 30 per cent.

"While AKFED is keen on complying with the laws of the land, it is not interested in disposing off its holding in the bank. The foundation prefers to bring down its holding in DCB through expansion of the equity size, which could be done only over a period of time," he said.

Mr Vir said DCB would initiate a dialogue with the RBI immediately after the IPO process is completed. "We are hopeful and confident that the RBI would provide adequate additional time for AKFED to bring down its holding in the bank to the stipulated levels."

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