Financial Daily from THE HINDU group of publications
Tuesday, Sep 16, 2003
Money & Banking
Markets - IPOs
Vijaya Bank prices issue at a premium of Rs 14
Bangalore , Sept 15
VIJAYA Bank has fixed a premium of Rs 14 per share for the Rs 240-crore second public offering expected to open early next month.
Briefing reporters here today, the Vijaya Bank's Chairman and Managing Director, Mr M.S. Kapur, said: "the pricing is line with the bank's revised financials." Vijaya Bank had made large provisions during the last year and some of these excess provisions would be corrected, he added.
The revised financials include the write-back of some floating provision made last year, amounting to Rs 98 crore.
The revised financials had pushed up the earnings per share of the bank to Rs 11.24, up from Rs 5.89 for the last financial year.
Accordingly the bank's board, Mr Kapur said that decided to fix the pricing at Rs 24. This pricing was very close to the current market price. Besides the pricing was translated into a dividend yield of five per cent, which was in alignment with the term deposit rates.
Further another public sector bank, Indian Overseas Bank had also priced its issue in the same pricing range.
Once the public issue is completed, he said, that the bank's total equity capital would increase to Rs 433.52 crore from the current level of Rs 333.52 crore.
The Government stake in the bank would come down to about 53.87 per cent from the current level of 70.02 per cent. The capital to risk weighted asset ratio would increase further to 15 per cent, up from the current level of 12.66 per cent. Of this, tier-one ratio currently is about 8.33 per cent.
Asked about the need for raising equity capital at this juncture when the bank's tier-one capital was already strong, he said: "We need to further expand the risk weighted asset portfolio."
The bank was planning to raise gross business to Rs 43,000 crore by 2005. The bank, he said, was targeting infrastructure and retail loans for growth.
Besides, he said, the bank was also constrained by the exposure norms for increasing risk-weighted assets. Currently, exposure norms are restricted to 15 per cent of the net worth to customers.
An expanded capital base would also allow it get around this exposure limit and in absolute terms allow the bank to raise its risk weighted assets.
He added the bank had made a good recovery in its performance during the year. This would further enhance the earnings. This year so far, the net non-performing assets were 2.6 per cent of the advances.
However, the NPA coverage ratio of the bank was as high as 60 per cent. Consequently as the NPAs are recovered, the bank would write back the recoveries into the profit and loss account.
In addition, it would also write back the provisions, which would result in pushing up the incomes.
Consequently profits this year were expected to show a considerable improvement, he added.
Stories in this Section
The Hindu Group: Home | About Us | Copyright | Archives | Contacts | Subscription
Group Sites: The Hindu | Business Line | The Sportstar | Frontline | The Hindu eBooks | Home |
Copyright © 2003, The
Hindu Business Line. Republication or redissemination of the contents of
this screen are expressly prohibited without the written consent of
The Hindu Business Line