HSBC, JP Morgan acquire 3% each in Dhanlaxmi Bank

HSBC and JPMorgan had acquired three per cent stake each in the Kerala-based Dhanlaxmi Bank by subscribing to its sale of shares to qualified institutional buyers (QIBs), Chief Executive Amitabh Chaturvedi said in Mumbai on Tuesday. The bank raised Rs 381 crore in the QIB issue.

The bank sold 21 million shares at a price of Rs 181.3 per share to 44 institutions, getting bids for two times the shares on offer. The investors include 35 foreign institutional investors, four mutual funds, and insurance companies. JM Financial Services and IDFC-SSKI Securities were the advisors for the sale. HSBC and JP Morgan had taken the stakes as foreign institutional investors, he said.

The equity sale would result in a 25 per cent equity dilution of the bank, and the stake of its initial promoter P Rajamohan Rao would decline to 7.7 per cent, Chaturvedi said.

Following the QIB issue, the bank’s capital adequacy would rise to 20 per cent, out of which Tier-I would be 14 per cent, he said. The bank might plan another share sale in 2011-12, he said. The bank’s shares fell 1.4 per cent to Rs 177.

The bank planned to use the money to strengthen its balance sheet and increase lending, Chaturvedi said. The bank expected to increase loans by about 80 per cent to Rs 9,000 crore by March 2011, he said.

Dhanlaxmi Bank plans to enter asset management business by taking 20 per cent stake in a mutual fund company. The bank was in the process of identifying a partner that would own a majority stake, but the management control would remain with Dhanlaxmi Bank, Chaturvedi said. The bank may finalise its decision on entry into the mutual fund business in the quarter beginning October.