The Government of India is to increase its stake in Andhra Bank to 58 per cent from existing 51.55 per cent. The stake increase is likely to happen before the month-end, Mr R Ramachandran, Chairman and Managing Director, Andhra Bank told Business Line here on Tuesday.

“This might result in a capital infusion in the excess of Rs 1,100 crore if the Government stake is to be kept at 58 per cent,” Mr Ramachandran said.

The transaction would be carried out in the form of equity plus premium as per the Securities and Exchange Board of India (SEBI).

The intention behind the likely increase in Government stake is to allow the bank to raise more Tier-II capital and facilitate a follow-on public issue in future.

WELL-CAPITALISED

However, Andhra Bank which had received Rs 618 crore capital infusion from the Government last month, does not need capital immediately as it ‘well-capitalised' at present with at a Capital to Risk Weighted Assets Ratio of 12 per cent as on December 31, 2010.

The headroom available for capital (both tier 1 and tier II) was at Rs 4,083.63 crore.

“The likely capital infusion will help us to progress towards Basel III norms in future as it will come under core capital, besides catering to consistent growth which is our hallmark,” Mr Ramachandran said.

In last two years, the bank's business had witnessed about 25 per cent growth and achieved a net business growth of Rs 50,000 crore.

“In September 2009, we were at Rs 1 lakh crore. Now, we have crossed Rs 1.50 lakh crore. The Net Interest Margin (NIM) has been highest in the industry at 3.91 per cent,” he added.

The bank, posted a net profit of Rs 331 crore, a 20 per cent increase over year-ago period, during the last quarter.

Andhra Bank scrip climbed 0.34 per cent on the BSE on Tuesday to end at Rs 136.45.

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