The Hindu Business Line : Karnataka Bank making pref allotment of shares to IFC

Mangalore/Chennai, Oct. 5 The board of the Mangalore-based Karnataka Bank Ltd, which met in Bangalore on Friday, has resolved to issue 63.73 lakh equity shares of Rs 10 each to International Finance Corporation (IFC) of World Bank Group on a preferential basis as per the guidelines of SEBI. However, this is subject to approval by the members at the EGM, to be held on October 31.

As per the current prices, the investment will work out to about Rs 140 crore.

When asked for comments, the Chairman and Chief Executive Officer, Mr Anantakrishna, said that he cannot comment on the likely investment. However, he made it clear that the “pricing will be worked out as per the SEBI guidelines”. While allaying fears of any takeover bid from any quarter, he said that the main objective of this is to have better capital adequacy ratio (CAR).

“We are going ahead with preferential allotment of shares to IFC, and the quantity will be less than five per cent of the total shareholding,” he said.

Takeover target

To a query whether the bank is a takeover target, he said: “We have done this to prevent any takeover bid from any quarter. IFC is a development investor. If somebody is eyeing us, IFC will come to our rescue.” The board has also resolved to issue Upper Tier 2 bonds on private placement basis to IFC to the extent of $10 million.

Public issue

Asked if the bank will go in for a public offer in the near future, he said: “We have not thought about it in the present circumstances. We have made up for maintaining CAR above 11 per cent. Only if there is a need, we will go for it (public offer). Otherwise, we are not.”

IFC’s reaction

Mr Jun Zhang, Manager, Financial Markets, IFC-South Asia, said: “IFC proposes to invest up to 5 per cent of the equity capital through preferential allotment with the aim of providing financial support to help the bank meet its expansion plans and asset growth targets. This is subject to IFC board approval.”

Asked about what IFC would bring to the table vis-a-vis a private equity investor, Mr Zhang said: “IFC aims to be a long-term investor in Karnataka Bank to support its institutional capacity in a sustainable manner. We will assist the bank in raising its profile, and enhancing value for investors. The capital structure of the bank will be optimised through an Upper Tier-II investment. IFC Advisory Services team will support the bank in areas such as risk management, and share best practices in SME financing and retail banking. In addition to supporting its growth plans, we expect that IFC’s assistance will eventually help enhance access to finance for the under-served segments, thereby generating additional employment in the country.”

Responding to a question on the benchmark return on investment that IFC had in mind while investing in banks, Mr Zhang said: “Our focus is on strengthening mid tier banks in India, building greater financial institution capacity, and expanding financial services to under-served segments.”

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Karnataka Bank making pref allotment of shares to IFC

Open offer for Zenotech

UTI relaunches GSF-Petro as Energy Fund

Capital goods stocks attract investor frenzy

Talks of delay in issue of fertiliser bonds hit stocks

Bank stocks dip on fund selling

Volatile movement

‘Foreign funds raise $30 b for Indian real estate investment’

UBS, Merrill Lynch, Morgan Stanley pick up stake in ICSA

BoB ties up with Pioneer for asset management

PowerGrid surges 93% on debut

Opening bell