Canara May Offer Ipo At Rs 25 Premium

The Rs 110 crore initial public offering (IPO) of Canara Bank is expected to carry a premium of Rs 25 a share. The exact premium will, however, be firmed up closer to the issue date.

Sources close to the bank said the premium for the IPO, which is expected in September, is being priced low so that more people can subscribe to the issue. The bank will, however, not opt for book-building.

Post IPO, the government's equity is expected to come down to around 73 per cent, sources said. The bank has also sought government's permission to return Rs 277 crore from the paid-up capital of Rs 578 crore.

The bank has been preparing for floating a public issue for sometime now. It cleaned up its balance sheet and even floated a VRS to reduce its staff cost.

For example, its return on asset, a standard measure of profitability, improved to 1.02 per cent during 2001-02 from 0.43 per cent during the previous year, while net NPA ratio reduced to 3.89 per cent compared with 4.84 per cent during the previous year.

Last year, under a voluntary retirement scheme, a total of 7,754 employees opted for the scheme which cost the bank a whopping Rs 900 crore. This cost will be staggered over five years.

The bank's current staff strength stands at around 47,000, while the total number of branches are around 2,400.

Canara Bank recorded a 160 per cent increase in net profit to Rs 741 crore for 2001-02, while its total income increased by around 19 per cent to Rs 7,799 crore.

Global business grew 12 per cent to Rs 9,157 crore . Profits from treasury operations increased by around 230 per cent to Rs 662 crore during 2001-02.

The bank's operating profit grew 46 per cent to Rs 1,656 crore. Capital adequacy ratio has increased by 2.04 percentage points to 11.88 per cent.

Canara Bank recorded a total business of Rs 97,157 crore during 2001-02 and has targeted a total business of Rs 1,12,000 crore during the current fiscal.