Syndicate Bank scraps follow-on issue

Udupi-based Syndicate Bank has shelved its plan for a follow-on public issue of 80 million equity shares and will be going for a qualified institutional placement (QIP) instead, officials familiar with the situation said.

Confirming the development when contacted, Chairman and Managing Director CP Swarnkar said, "We have taken a view to go for QIP and we may apply to the government soon for its approval."

The bank has taken the decision as it feels the shares of the bank are undervalued, an official said. "In addition, cost and time can also be saved. The government is also encouraging public sector banks to go for QIPs rather than FPOs (follow-on public offers)," the official said.

The state-run bank intends to raise about Rs 800 crore via QIP issue, which is likely to take place in two tranches, of which the first will be in the first quarter of 2008-09 (April-March).

However, Swarnkar said if the bank gets the government's approval quickly then it may raise the funds in the current financial year.

At present, the government's stake in the bank is 66.47 per cent, which may get diluted to 57 per cent post the fund raising.

The funds will be required for Basel-II implementation and to fund the bank's growth plans. It aims to grow its business about 25 per cent in 2008-09.

Syndicate Bank is the second state-run bank that is planning to raise funds via QIP. Bank of India was the first one to raise funds through this route.

The bank also aims to maintain a capital adequacy ratio of 12 per cent. As of December-end, the bank's capital adequacy ratio was 11.99 per cent.

Currently, the bank is in the process of raising funds through medium-term note in foreign currency for about $175 million. This process is expected to be completed in about six-eight weeks.