The Hindu Business Line : Rights issue: Karnataka Bank clears amended resolution

Mangalore, July 12 The 84th annual general meeting of Karnataka Bank here on Saturday unanimously approved a resolution with amendment to issue shares to the shareholders on rights basis in the ratio of one equity share for every five shares held on the record date. However, the timing of the rights issue was not decided.

The original resolution stated that the shares will be issued for cash at a price of Rs 100 a share, including the premium of Rs 90. In the amended resolution, it was decided to offer the share at less than 50 per cent of the market price of the share at the time of its issue, not exceeding Rs 100 a share.

Giving an example about the pricing to the shareholders, Mr Ananthakrishna, Chairman and Chief Executive Officer, said that even if the market price crosses Rs 300 a share whenever the bank comes out with the rights issue, the offer price will not exceed Rs 100 a share.

However, he did not mention about the timing of the rights issue. Later when Business Line spoke to him after the meeting, he said that the timing of the issue is not yet decided.

“We may take a decision, may be in the next board meeting or later, after considering the market conditions then. As of now, we have taken the enabling clause for that,” he said.

Asked if the bank will venture for rights issue during this quarter, he said that it is unlikely.

Additional capital

Explaining the need for raising the capital, Mr Ananthakrishna said that from March 2009 the bank needs additional capital to comply with Basel II norms.

“By March 2009, we need a total capital of Rs 2,100 crore. Now it is Rs 1,600 crore. We may get internal accruals of Rs 160-200 crore. We have to raise the capital for the remaining amount,” he said. This will enable the bank to expand its business and improve the capital to risk weighted assets ratio.

The annual general meeting also approved the proposal to issue and allot shares, in one or more tranches, to qualified institutional buyers, not exceeding Rs 500 crore.

Earlier addressing the shareholders, he said that the total number of branches will be increased to 460 from 433 by the end of the current fiscal.

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Rights issue: Karnataka Bank clears amended resolution