The Hindu Business Line : Indian Bank IPO `only after capital revamp'

Speaking to reporters here today, Indian Bank's Chairman and Managing Director, Dr K.C. Chakrabarty, said, "An IPO can be made only after the capital is restructured."

Currently, Indian Bank has a bloated equity base of Rs 4,573.96 crore.

Indian Bank's proposed restructuring involves setting off its accumulated losses of Rs 3,830 crore against the capital.

This, Dr Chakrabarty said, would bring down the equity base to Rs 743 crore. In addition, some capital would have to be returned to the government to shrink the equity further before an IPO could be made, he added.

Besides, even after netting the accumulated losses, the bank already had a comfortable capital-to-risk weighted asset ratio (CRAR) of 14 per cent. If the Basel II guidelines are fully implemented from 2007, inclusive of operating risk parameters onwards, the bank would still have a CRAR of 11.5 per cent, he added, inclusive of reserves of Rs 1,700 crore.

"We are actually quite comfortable," he added.

The bank, he said, was likely to have cash recoveries of close to Rs 500 crore this year. Already, for the first nine months of the current financial year, it had effected recoveries amounting to Rs 310 crore.

Of this, at least Rs 140 crore had contributed to the bottomline, pushing up its net profits. Net profits this year was likely to be close to Rs 500 crore, Dr Chakrabarty said.

For the first nine months period, the bank had earned a net profit of Rs 365 crore, up from Rs 228.52 crore in the year-ago period.

The bank hopes to end the year with a gross business of around Rs 65,000 crore, he said.

Advances would be at least Rs 22,000 crore this year. For the first nine months the bank had advances of Rs 21,751 crore, a 27-per cent increase over the year-ago period.

He said about 51 per cent of the advances were on priority sector and 21 per cent to the farm sector. Such advances earned the bank interest upwards of 10 per cent per annum. This gave a net margin in farm advances of 4 per cent.

Besides, he said, Indian Bank had now entered a select club of banks with net non-performing assets (NPA) of under one per cent to 0.9 per cent.

In 2001, the bank had net NPA of 10.07 per cent. Similarly, the gross NPAs were also down to 3.32 per cent from 21.38 per cent during the same period.

The reduction, he said, was achieved through a combination of write-offs, provisioning and aggressive recoveries.

Networking: Dr Chakrabarty said that the bank was poised to connect 500 branches by this fiscal using TCS's banking solution.

"If digital connectivity is assured, all the branches will be computerised by next year-end," he said.

Pact with Pondy Govt: The bank had also tied up with the Pondicherry Government for inclusive banking strategies.

This approach involved getting at least 80 per cent of the eligible population in Pondicherry to open bank accounts. This would be a pilot project, which would eventually be taken to other States, he added.

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