The Hindu Business Line : DCB's main promoter to trim stake

Capital adequacy ratio
The IPO is expected to firm up the CAR, which was 9.39 per cent on June 30
It is expected to touch 19 per cent post-issue

Mr Nasser Munjee (left), Chairman, Development Credit Bank Ltd (DCB) and Mr Sultan Allana, Director, AKFED, at a press conference to announce the company's IPO in Mumbai on Monday. - Shashi Ashiwal

Mumbai , Sept. 25

The Aga Khan Fund for Economic Development (AKFED), the main promoter of Development Credit Bank (DCB), has decided to trim stake from 58.43 per cent to 30.13 per cent through an initial public offer of 7.15 crore equity shares.

DCB is planning to raise Rs 150-180 crore by the issue with the price band being set between Rs 22 and Rs 26. The issue will open on September 26 and close on October 6. The book running lead managers to the issue are JM Morgan Stanley and Enam Financial Consultants.

Last year, AKFED invested $32 million in DCB to strengthen its capital base. The Reserve Bank of India guidelines bar any single entity from holding more than 10 per cent stake in a bank.

Stake dilution

Addressing a press conference, Mr Naseer Munjee, Chairman, DCB said, "It is too premature to say by when AKFED will bring down its stake. As the bank increases in size there will be a stake dilution."

"We don't have a concrete plan for reducing AKFED's stake in DCB. But any decision will be in the best interest of the institution," said Mr Sultan Allana, Director, AKFED.

In February 2006, DCB had raised private equity capital of Rs 51.9 crore.

Mr Munjee said the public issue would firm up the bank's capital adequacy ratio, which was 9.39 per cent as on June 30. It is expected to touch 19 per cent post-issue.

DCB had a net loss of Rs 72.9 crore for the year ended March 2005 and was in the minus by Rs 80.5 crore for the year ended March 2006.

The net worth as on March 31 was Rs 139.3 crore.

Growth plans

The bank is planning to target the small and medium enterprises and retail for its growth, said Mr Gautam Vir, Managing Director and CEO.

DCB showed a profit of Rs 4.3 crore in the first quarter of 2006 by improving the share of low-cost deposits from 22.71 per cent in fiscal 2005 to 32.06 per cent in fiscal 2006. As on March 31, the net NPAs were 4.5 per cent of total advances.

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