Business Daily from THE HINDU group of publications
Thursday, Jun 22, 2006
Business Daily from THE HINDU group of publications Thursday, Jun 22, 2006 |
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Public Sector Banks Money & Banking - Preferential Allotments Indian Bank seeks to shrink equity base Our Bureau
Capital rejig plans Preference issue for 15 years at 8 pc coupon Equity base will be shrunk to Rs 343.82 cr Better price realisation for its IPO early next year
MR K.C.CHAKRABARTY
Bangalore , June 21 Indian Bank has sought the conversion of Government equity into preference shares as part of a capital restructuring exercise. Speaking to newsmen here on Wednesday the bank's Chairman and Managing Director, Dr K.C. Chakrabarty, said, "We have sought conversion of at least Rs 400 crore into tier-II preference capital." He said that the preference shares, proposed to be issued, would be close ended and would comprise part of the tier-II capital. The preference capital would be for 15 years with a coupon of 8 per cent, he added. The preference capital, he said, would shrink the bank's equity base to Rs 343.82 crore from Rs 743.82 crore. It would also help in better price realisation for the bank's initial public offering early next year. The tentative proposal is to make an issue of 80 million shares, for which the red herring prospectus would be filed with the capital markets regulator by the year-end. Currently, the bank has a capital to risk weighted asset ratio of 13.19 per cent, of which 10.2 per cent comprised of tier I (net worth). The bank, he said, had sufficient flexibility for tier-II capital. Dr Chakrabarty said that the bank was planning recoveries in excess of Rs 500 crore this financial year. At least 90 per cent of the recoveries would be from assets fully written off. This recovery, he said, would help the bank bottomline rise by at least 25 per cent. During the last financial year, Indian Bank made a net profit of Rs 504.48 crore. The bank, he said, has targeted a 20 per cent increase in credit and 16 per cent increase in deposits for the current financial year. The bank has allocated Rs 4,000 crore for farm credit disbursal. Dr Chakrabarty said, "We will provide credit to the farm sector at 7 per cent to all farmers, consistent with the government's direction." This would be a profitable proposition for the bank. This was in view of the subvention of 2 per cent that would be reimbursed to the bank, effectively resulting in an asset yield of 9 per cent on agricredit.
Presence in East Asia
He said the bank was also beefing up its external operations by strengthening its presence in East Asia. Dr Chakrabarty said that Indian Bank had applied for branch licences in Indonesia and Vietnam. But one of the major constraints was stiff entry barriers imposed by the banking regulators in the region. In Indonesia, foreign branches are expected to bring in at least $300 million as capital. "We are still awaiting the regulators' response," he said. By this year-end, the bank also hoped to bring all the branches within the core banking solution (CBS), he said. So far, the CBS coverage is about 72 per cent of the branches. Referring to the project on banking inclusion, for which Indian Bank has adopted Pondicherry, he said that the bank hoped to cover the entire territory by this year-end.
Related Stories: More Stories on : Public Sector Banks | Preferential Allotments | IPOs
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