Canara Bank to get Rs 1,500 cr fund infusion from LIC

Bank to issue 4 crore shares through preferential allotment

State-owned Canara Bank is likely to get fund infusion of up to Rs 1,500 crore from the country's largest insurance firm Life Insurance Corporation of India (LIC) next month.

"The fund would be raised by issuing 4 crore shares through preferential allotment and the capital raised would be utilised for business growth," a senior Canara Bank official said.

At the current market price, Canara Bank would be able to raise about Rs 1,500 crore by issuing shares on preferential basis.

The bank has fixed March 31 as the relevant date for determining the price at which the shares would be issued to the insurer, the official said.

As of December 2014, LIC held 6.4% stake, or 2.95 crore shares, in the bank.

The bank already has got in-principle approval from LIC for subscription of up to 4 crore shares.

As per the approval letter from LIC, the official said, total exposure cannot exceed 15% of post issue capital of the bank at any point of time.

The board of Canara Bank has already given approval for issuance of preference shares. The bank would seek shareholders' nod for the same on April 30.

After approval from the Extraordinary General Meeting, preferential issue in favour of LIC would be done, the official added.

For the third quarter ended December 2014, Canara Bank reported 60.2% increase in net profit at Rs 655 crore despite increase in bad loans.

The Bangalore-based lender had posted a net profit of Rs 409.35 crore for the October-December quarter of 2013-14 fiscal.