The Hindu Business Line : Dhanalakshmi Bank plans to float venture capital fund

Mumbai, July 3 Thrissur-headquartered Dhanalakshmi Bank plans to enter the venture capital fund space. The old-generation private sector bank is seeking to float a fund that will have a corpus of Rs 2,000 crore for investing in start-ups.

The bank will invest Rs 10 crore towards the share capital of the VC fund. It will build the fund’s corpus by garnering investments from international funds and high networth individuals.

“Once our board clears the proposal, we will approach the banking and market regulators for their permission. The venture capital fund should get off the ground in six to eight months. We are currently scouting for a CEO to head the venture capital fund’s operations,” said Mr Bipin Kabra, Chief Financial Officer, Dhanalakshmi Bank.

The venture capital fund will target an annualised return of around 25 per cent, he added. Elaborating on his bank’s capital raising plans, Mr Kabra said Rs 400 crore would be raised in a couple of tranches over the next few months to augment Tier-II capital.

“We are under-capitalised in terms of Tier-II capital. We will take advantage of the declining yield curve and raise funds in tranches. The capital so raised will support our plan to grow advances, especially on the corporate-side, by 50 per cent year-on-year,” he said.

Dhanalakshmi Bank sees a big opportunity to expand its loan book on the corporate banking side. With some large banks reaching their internally set exposure limit to top-rated corporates, the bank wants to fill in the gap by extending working capital term loans. The private sector bank has set an internal exposure limit of Rs 70 crore to a top-rated corporate and Rs 150 crore for a group. As of March-end 2009, Dhanalakshmi Bank had Rs 4,800-crore deposits and Rs 3,250-crore advances.

On network expansion, Mr Kabra said the bank will expand its branch network by 66 in the current calendar year. This will take the branch network to 247. In the next year, the bank plans to add another 100 branches.

Meanwhile, the bank has identified AGS, an associate of German IT major Wincor Nixdorf, to set up ATMs on an outsourced basis.

According to Mr Anand Gupta, Head – Alternate Channels, Dhanalakshmi Bank, the vendor (AGS) will own, operate and maintain the ATMs and the bank will pay the former on per transaction basis. “We will have the right to identify the site for setting up the ATM. The vendor will own, operate and maintain the ATMs. This use and pay model will result in around 10 per cent savings in capital and help us ramp up our ATM network to around 450 in the next few months from the existing 72,” he said.

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