UCO Bank may opt for QIP instead of follow-on offer

Public sector UCO Bank might raise funds through a qualified institutional placement (QIP) instead of the proposed follow-on public offer (FPO) of 60 million equity shares.

At an extraordinary general (EGM) meeting here today, the bank’s shareholders approved raising of funds either through an FPO or a QIP, said SK Goel, chairman and managing director, UCO Bank.

After the issue, the government’s shareholding in the bank would come down from 64 cent to 58 per cent, he said.

The bank's board is slated to meet on March 19 to discuss the issue.

“In today's EGM, we have taken shareholders’ approval to raise funds either through an FPO or a QIP. The bank’s board will take a final call,” he said.

While the FPO has been approved, the bank needs the government’s approval for a QIP.

While the bank was expected to get a good price for its FPO, in case of the QIP, the lower cost of issue was an advantage, said Goel.

“In general, the government prefers the FPO, as it ensures that the shareholding is broad-based. In a QIP, the shares are concentrated in a few hands. In a QIP, the cost is much less,” he said.

The bank is hoping to raise around Rs 400 crore through the issue.

The bank expects to soon get Rs 500 crore from the government as Tier-I capital.

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

The bank expected to get the remaining Rs 250 crore in the next financial year, said Goel.

Earlier, Goel had said that he expected to get Rs 750 crore this financial year.

In December 2008, UCO Bank restructured its 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 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 in advances this financial year.