The Hindu Business Line : L&T can pick up only 4.7% in City Union Bank: RBI

The Reserve Bank of India has approved an issue of only 12 lakh shares of City Union Bank to L&T, against the company's proposal to pick up 26.65 lakh shares in the bank.

City Union Bank and L&T had earlier agreed that the latter would pick up 9.99 per cent stake in the bank at a price of Rs 169. However, the bank today announced to the stock exchanges that approval from the RBI had been received for issuing 12 lakh shares, which translates to 4.7 per cent of the bank's equity.

Consequently, the bank will receive Rs 20.28 crore from L&T; it would have got Rs 45 crore, if the regulator had approved L&T to take a 9.99 per cent stake in the bank.

However, the bank does not believe that this is any setback, because in any case it is preparing the ground for a second round of funding.

It is understood that the bank intends to raise the number of paid-up shares from 2.4 crore at present to three crore by the end of March 2008. The issue of 12 lakh shares will take the number of paid-up equity shares of the bank to 2.52 crore, leaving 48 lakh shares to be issued to prospective investors.

The City Union Bank's Executive Director, Mr N. Kamakodi, had recently told Business Line that the bank would like to raise Rs 400 crore in its second round of funding, towards meeting its internal target of reaching Rs 1,000 crore of net worth by 2010.

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