Union Bank gets the nod for second public issue

Union Bank of India has received approval from the government for its second public issue of equity shares. The Mumbai-based bank will issue 4.5 crore fresh equity shares, which translates into an issue size of around Rs 550 crore taking into account its current traded price.

Union Bank chairman, K Cherian Varghese said the bank plans to raise Rs 500 to Rs 600 crore through a follow-on public issue. The bank's scrip closed at Rs 119.25, up 1.58 per cent.

The government's stake in the bank will fall to 55.45 per cent after the proposed issue from the current 60.85 per cent. The bank plans to tap the market in the fourth quarter of 2005-06.

The bank said the issue was aimed at shoring up its capital adequacy ratio in view of the robust growth in credit and to meet additional capital needs once the stringent capital adequacy norms (popularly known as Basel-II) are implemented from March 31, 2007. The bank's capital adequacy ratio as on September 30, 2005 was 11.06.

Varghese said the bank intends to maintain capital adequacy ratio at a minimum of 11.50 per cent and the public issue will help in achieving it.

The bank will now convene an extraordinary general meeting of its shareholders for approval and then seek the approval of the Securities and Exchange Board of India.

The bank's paid up equity is Rs 460.12 crore and reserves and surplus of Rs 3,150 crore.