Indian Bank to file draft red-herring prospectus for FPO in a month

Indian Bank today said it would file a draft red herring prospectus (DRHP) for its proposed follow-on public offer (FPO) in the next 30 days. The public sector lender expects to raise Rs 1,500-1,600 crore through the FPO.

After getting an approval from the Securities and Exchange Board of India (Sebi), the FPO would hit the market within a year, depending on market conditions, Chairman and Managing Director T M Bhasin told reporters here after the bank’s annual general meeting.

“We are yet to decide on the quantum; it will be based on Sebi guidelines,” he said, adding that the fund-raising was to augment Tier-1 capital, when Tier-II capital is more costly.

Earlier, Bhasin had said the funds raised from the offering, coupled with ploughing back of profits, would give the bank an additional Rs 3,000-crore Tier-I capital and help it grow its loan book by Rs 20,000-25,000 crore.

The Chennai-headquartered bank also had the option of raising Rs 6,252 crore through Tier-II bonds, Bhasin added. The FPO would amount to a further 10 per cent stake dilution by the government.

According to the bank’s annual report for 2010-11, its authorised capital stood at Rs 3,000 crore. At present, the central government holds 80 per cent of equity capital in the bank. The paid-up capital comprises equity share capital of Rs 429.77 crore and perpetual non-cumulative preference share capital (PNCPSC) of Rs 400 crore.

In the context of the implementation of Basel III from 2013, taking into account the future scenario of business expansion and the projected profitability, it is felt that the bank should expand its equity capital base and have a sound capital adequacy ratio (CAR) for the next three years time period.

The bank had proposed to convert the PNCPSC of Rs 400 crore held by the government into equity capital so that the CAR would improve. The said conversion of PNCPSC into equity capital is also expected to improve the book value of the equity shares of the bank. The state-run lender had received the government’s approval to raise equity capital of Rs 61.40 crore through book-building process by an FPO comprising 61.4 million equity shares at Rs 10 each at a premium to be decided by the bank.

In an unrelated development, the public sector lender has decided to defer its plan to launch an insurance company, after a committee set up by the Insurance Regulatory and Development Authority (Irda) recommended that banks be allowed to tie up with two insurers.

“Initially, we thought we would float a company along with a domestic or foreign partner, but since Irda is now planning to allow banks to sell two insurers’ products, we have decided to continue with bancassurance. This way, we do not have to put capital in a new company,” he added.

Bank to be listed in Singapore in mid-July

Indian Bank would list bonds in the Singapore Stock Exchange by mid-July. The bank is planning to raise $1 billion (around Rs 4,400 crore) through the issue of medium-term notes (MTN) in two tranches.

The proposed fund-raising will increase the bank’s credit exposure by Rs 4,500 crore abroad. After the fund-raising, the bank’s overseas loan book would increase by around Rs 4,500 crore and bonds by about Rs 4,500 crore. Current overseas business of the bank stands at around Rs 3,500 crore.