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C.J. Punnathara

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Kochi Jan. 23

Based on the recommendation by the FIPB, the Union Finance Minister, Mr P. Chidambaram, has approved a proposal from AIF Capital Development, Mauritius, to invest up to 15 per cent in the equity base of Catholic Syrian Bank.

The investment attracts Press Note 1 clause, which is applicable to foreign investors who already have existing joint ventures, technology transfers or trade mark agreement in the country. AIF Capital Development already holds a stake in YES Bank and Catholic Syrian Bank would be the next bank where the foreign investor makes a strategic investment, senior sources in the bank said.

"This strategic investment goes to show the inherent financial strength of Catholic Syrian Bank and would greatly enhance value to the shareholders," Mr N.R. Achan, Chairman of the bank, said. The bank's shares had recently risen by 50 per cent from Rs 80 to Rs 120 in informal transactions. The bank is still to go for a public issue.

The bank was seeking fresh infusion of capital and the board had earlier approved a proposal for private placement of its equity, which was later approved by the shareholders at the last AGM. The present investment is expected to provide the much needed capital to the bank.

The next strategy of the bank would be to go in for a public issue and list at the major bourses. This would bring out the true value of the bank's shares and extend substantially higher liquidity, stock market sources said.

Asked why the investor was willing to take equity stake in a bank that has very little liquidity, Mr Achan said that the valuation of the bank's shares are quite attractive and its growth prospects promising are also quite good. Based on the book value, the bank will arrive at a share value for its equity in consultation with AIF Capital Development, which will then be forwarded for approval to the RBI.

Subject to the RBI approval, the bank would then permit the foreign investor to invest in the bank's capital. A 15 per cent stake in the bank would translate to around 1.89 crore shares, bank sources said.

More Stories on : Private Banks | Foreign Direct Investment | Foreign Institutional Investors

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