UCO Bank for FPO, issue by May-end

Public sector lender UCO Bank has firmed up plans to raise funds through a follow-on public offer (FPO) by issuing 60 million equity shares.

Earlier, at its extraordinary general on March 2, the bank had taken its shareholders’ approval to raise funds either through an FPO or a qualified institutional placement (QIP).

The FPO would bring down the government stake from 63.59 per cent to 58.60 per cent, said Chairman and Managing Director SK Goel.

“In QIP, the shares are held in a few hands. So, we have decided to go for an FPO. The issue is likely to hit the market by the end of May,” Goel said.

The bank held its management committee meeting on Friday, while its board will meet tomorrow. The lender hopes to raise Rs 500 crore through the offer.

“In general, the government prefers FPO, as the shareholding is broadbased. In QIP, the shares are concentrated in few hands. However, the cost is much less in QIP,” Goel had said earlier.

The bank expects to get Rs 500 crore from the government before the end of the financial year.

As part of its capital restructuring, the bank had received Rs 450 crore in March 2009, out of the proposed Rs 1,200 crore.

In December 2008, UCO Bank restructured the bank’s equity capital by converting Rs 250 crore out of the total equity capital of Rs 799.36 crore into perpetual non-cumulative preference shares.

The capital restructuring move led to the government stake coming down from 74.98 per cent to 63.59 per cent. The bank is expecting a 20 per cent year-on-year growth on advances this financial year.