City Union Bank to raise Rs 1,000 cr through QIP route

City Union Bank (CUB) is planning to raise around Rs 1,000 crore over the next three years through qualified institutional placement (QIPs). The bank had already got approval from its board to raise Rs 300 crore and is planning to seek approval for another Rs 700 crore.

After announcing bank’s results in Chennai today N Kamakodi, executive director, City Union Bank said the bank had set a business target of Rs 22,000 crore and a total business for the present fiscal Rs 50,000 crore by 2013-14. “To support this target we need another Rs 1,000 crore, which will be raised from both domestic and foreign institutions by way of QIP.”

In September last year, the bank got its board approval to raise Rs 300 crore, which was not utilised and the negotiations are on for with the investors, said Kamakodi. “We will go back to the board to seek another set of approval to raise balance amount of Rs 700 crore,” he added.

“If we have to grow at the rate of 30 per cent we have to increase our capital everY three years.”

In the last three years the bank raised Rs 200 crore through rights issue and through preferential allotments.

The Kumbakonam-based private bank closed year-ended March 31, 2010 with a net profit of Rs 152.76 crore as compared to Rs 122.13 crore, an increase of 25.08 per cent. “We are posting profit continuously for the last 100 years,” he noted. For 2010-11 the bank had set a target of Rs 210 crore net profit.

As part of the expansion plan, the bank is planning to open 56 branches for which it got approval from the Reserve Bank of India during the present fiscal. Presently, the bank has 222 branches, mainly in Tamil Nadu.

One-third of the new branches will come in Tamil Nadu, while rest will spread in other parts of the country, he added.

The bank is planning to add 550 new employees during the present fiscal.

Commenting on merchant banking, Kamakodi said, the bank yet to receive nod from the regulator for merchant bank. It may be noted the bank had signed a MoU in 2008 with Colombo-based Hatton National Bank. “Both the regulators have not given approval,” he added.