Business Daily from THE HINDU group of publications
Wednesday, Jul 11, 2007
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Business Daily from THE HINDU group of publications Wednesday, Jul 11, 2007 ePaper |
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Private Banks Money & Banking - Preferential Allotments Markets - Stocks
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Mumbai, July 10 The Tatas are picking up a stake in the Mumbai-based Development Credit Bank (DCB), which could just fall short of the 5-per cent mark. The investment is being routed through the newly formed Tata Capital Ltd, a company created to give an added focus to the group’s presence in the financial services business. This follows the announcement by the bank that it is convening a meeting to seek shareholders approval for making a preferential issue of shares to Tata Capital and its associates besides four other institutional investors. Issue of Shares
The bank is proposing to issue shares at a price of Rs 105 each and mobilise Rs 310 crore. The fresh issue of shares will constitute up to 16.6 per cent of the bank’s post-issue share capital, it said in a notice to the Bombay Stock Exchange. “It is a financial investment and the clause of ‘up to 4.6 per cent’ is more an enabling provision in case the RBI does not approve of one or more of the investors. Post issue, one or more of the investors will have less than 4.6 per cent stake,” said Mr Adil Kasad, Chief Financial Officer, Development Credit Bank. Growth opportunities
The preference issue will result in the bank’s capital adequacy ratio, which currently stands at 10.5 per cent, shooting up to 18.5 per cent, post issue, according to Mr Kasad. He is also not ruling out acquisitions. “The budgeting of capital has been only for organic growth but we will keep our eyes and ears open if there is an inorganic opportunity at the right price and the right time,” said Mr Kasad. Development Credit Bank turned around its business in 2006-07. The bank reported a net profit of Rs 7.3 crore in the recently concluded fiscal, compared with a net loss of Rs 85 crore in the previous year. Currently, the retail business accounts for 39 per cent of the bank’s portfolio while the rest of the 61 per cent comes from the corporate sector. “We plan to even out the portfolio by making it 50:50 between retail and coporate. We hope to see 50-55 per cent growth in the retail business in the next 12-18 months,” said Mr Kasad. Acquiring Stakes
“We are aiming to end the year with a net profit of Rs 45-50 crore,” he added. The bank’s shares closed at Rs 109.95 on the BSE on Tuesday. “Companies are looking at acquiring stakes in such boutique banks in the anticipation that when the banking sector opens for mergers and acquisitions in 2009, there will be a potential acquirer and they will get good returns,” said a banking analyst. Tata Sons had announced in June 2007 that Tata Capital, its wholly owned subsidiary, will offer services in capital market, merchant banking, housing finance, private equity, and vehicle and retail finance.
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