Kumbakonam-based City Union Bank will make preferential issues to six investors subject to approval from its shareholders and the Reserve Bank of India. The proposed investors include domestic players such as LIC, Larsen and Toubro and Yatish Trading, a promoter-group company of Brics Securities. Besides this, the bank has also made a preferential allotment to a Mauritius-based venture capital firm called Ares Investments and to a US-based FII called Argonaut Ventures.
FMO, a Netherlands-based DFI has also been offered an equity stake. This has been the second placement stake which has been made to L&T. The preferential issue would infuse capital worth up to Rs 120 crore into the bank, helping it achieve a net worth of Rs 400 crore. The bank would be seeking approval from shareholders in its extraordinary general meeting on June 2, 2007. Following this, the bank would be seeking approval from the Reserve Bank of India.
Bank officials informed that the procedure would get completed over 3-4 months. LIC, L&T and FMO would each have a 4.83% equity stake in the bank. Ares Investments and Argonaut Ventures would own up to 4% each and Yatish Trading, which already has some stake in the bank would also own up to 4% equity in the bank.
Last year, L&T had offered to pick up a 9.99% stake in City Union Bank. RBI allowed L&T to pick up an equity stake of 4.73% as regulations do not allow a domestic corporate to own more than 10% ownership in a private bank.
Even after the preferential allotment, L&T would own less than 5% stake in the bank. The bank has offered upto 15 lakh shares to LIC and 3 lakh shares to L&T at a price of Rs 169.15.
FMO, Netherlands has been offered up to 15 lakh shares at Rs 190 while Ares Investments and Argonaut Ventures have been offered 12,50,000 shares. The bank has proposed to allot upto 10 lakh shares to Yatish Trading.
The total paid-up capital of the bank has risen to Rs 32 crore, from Rs 25.2 crore. As on March 31, 2007, the bank had a net worth of Rs 286 crore. L&T made an investment of Rs 20 crore, picking up a 4.73% stake, earlier this year. The bank’s capital adequacy ratio, which was around 12% a year ago, could now rise to 13.5%, following these investments.
Source : Economic Times