Allahabad Bank defers rights issue

Allahabad Bank has deferred its plans to raise funds through a rights issue and perpetual debt saying it has sufficient means to raise up to Rs 2,500 crore through tier I and II capital.

At a press conference here on Friday, the bank’s Chairman and Managing Director K R Kamath said, “As of now, we are not in favour of any dilution of the government’s stake. Except for the State Bank of India, the government has not allowed any other bank to go for a rights issue. We will raise funds at an opportune time. If an increase in asset base is required, we have headroom to raise up to Rs 2,500 crore through tier I and II capital. This will help maintain the present level of capital adequacy ratio (CAR) for the next two years.”

At present, the government hold a 55.23 per cent stake in the Kolkata-based bank. In June, the bank’s board had approved the proposal to approach the finance ministry to obtain permission for a rights issue.

“The government has not yet responded to the request. This is not the right time for a rights issue, as the book value per share of the bank is close to Rs 118, while the market value is Rs 62,” said the bank’s Executive Director K K Agarwal.

Earlier this year, A C Mahajan, former CMD of the bank had said that the lender wanted to raise Rs 300 crore through perpetual debt, which falls in the tier-I category. However, Agarwal clarified that the bank did not intend to raise funds through this route now.

Other public-sector players such as the Union Bank of India and Syndicate Bank have also deferred their rights issue plans due to market volatility.