Kerala-Based Catholic Syrian Bank is on course to have new investors on board — a clutch of private equity funds. AIF Capital, one of the largest Asia-based independent private equity funds, is now buying into the old private bank which has been a target of takeover attempts in the past.
The bank is now planning a preferential issue of 5% to the fund at Rs 190 a share, according to sources close to the development. Three other private equity funds are also on course to pick up an additional 13.5% stake through the preferential offering. CSB will make a preferential allotment of shares aggregating 4.5% each to three other private equity funds. The proposal is now before the banking regulator the Reserve Bank of India. AIF Capital has an exposure to the local banking sector through its acquisition of a 5.3% stake in Yes Bank.
Banking sources said that AIF Capital had initially proposed to acquire 15% stake in the bank. However, the Reserve Bank of India has allowed the private equity fund to buy only 5% of CSB’s equity. Although CSB is an unlisted bank, the placement of shares appears to be at a significant premium in the light of other deals which have been struck in the banking segment. Sources said that in informal deals, the shares of the bank are being exchanged at prices between Rs 100 and Rs 125. The current book value of the bank is Rs 175 per share.
The preferential allotment of 24 lakh shares will help the bank increase its net worth which is way below the regulator-mandated figure of Rs 300 crore. After the proposed preferential allotment of 18.5% of the capital of CSB, the net worth of the bank will rise to close to Rs 221 crore from Rs 175 crore now. Once the deal is closed, the bank will weigh the option of a rights offering aggregating Rs 100 crore. A rights issue can help the bank boost its net worth in excess of the regulatory norms and help increase the capital adequacy ratio to close to 15% from 9.58% now.
Source : Economic Times