Dhanalakshmi plans to raise Rs 400 cr via Tier-II bonds

Kerala-based Dhanalakshmi Bank plans to raise Rs 400 crore, through Tier-II bonds in 2009-10, to support its asset growth.

Net worth of the bank was above Rs 400 crore at the end of March 2009. While this forms Tier-I capital, the bank can tap the market to raise capital by issuing Tier-II bonds. According to the bank’s Chief Financial Officer Bipin Kabra, very little room in Tier-II has been used so far.

Kabra, however, did not elaborate on when the bonds would be issued.

The capital adequacy ratio (CAR) at the end of March 2009 was 15.38 per cent, much above the regulatory floor of 9 per cent. This capital, along with the Tier-II bonds, could support in doubling of the bank’s balance sheet, he said.

Kabra said the bank can grow its credit profile in 2009-10 at twice the rate of the industry trend as it has a small outstanding loan portfolio. The Reserve Bank of India (RBI) has estimated a non-food credit growth at 20 per cent for the current financial year.

The bank’s total advances moved up from Rs 2,163.73 crore at the end of March 2008 to Rs 3,245.3 crore ended March 2009. The bank has increased its credit to the wholesale banking corporate segment in 2008-09 by lending about Rs 800 crore.

Ever since the the financial crisis started, the liquidity became tight. This forced some companies to lower the threshold for banks to lend to them. Plus, the banking relationships of team members also helped to make dent in corporate banking, Kabra said.

Referring to the bank’s growth in the fee-based income, Kabra said the lender’s present share in total income is close to 10 per cent, which it intends to grow to 30 per cent over the next four-five years. Its non-interest income increased from Rs 42.03 crore in 2007-09 to Rs.79.36 crore in 2008-09.

Among other measures, the bank is expanding its branch network along with more thrust on the government business as part of wholesale banking.

Aggressive selling of financial products like mutual funds and insurance and earnings from government business should help the bank increase share of fee-based income, he said.