DCB to hike net worth to Rs 500 crore

Mumbai-based Development Credit Bank (DCB), which got listed last month, plans to further increase its net worth to Rs 500 crore from around Rs 350 crore through more capital issuances.

The fresh floats will also help dilute the stake of Aga Khan Fund for Economic Development (AKFED), the promoter, from over 31 per cent to within the Reserve Bank of India-permitted 10 per cent. RBI has asked DCB to reduce AKFED's stake to the maximum permitted, by March 31, 2007.

"We are looking at taking the net worth to Rs 500 crore from Rs 350 crore at present as early as possible," said Gautam Vir, managing director and CEO.

The bank had raised Rs 186 crore through its initial public offering (IPO) earlier this month. Post-IPO, AKFED's stake, which was at 58.43 per cent, came down to close to 31 per cent.

The small-sized private sector bank has informed the Bombay Stock Exchange (BSE) that a meeting of the board would be held on November 24, to consider options for raising of additional capital and increasing the cap for foreign institutional investors (FIIs) holding of investments in bank's capital.

The board would also look at convening an extra ordinary general meeting (EGM) of shareholders for seeking their approval interalia, on above issues.

"The board meeting will help us create enabling provision to enhance capital, further dilute equity. We are under pressure to dilute the promoter's stake," said Vir.

The bank is looking at roping in a foreign bank as a strategic investor and is likely to offer up to 5 per cent stake.

"We are looking at a strategic partnership with a well-established international bank and are in dialogue with a few banks," said Vir. The bank also plans to bring in other investors to meet the net worth target.

"There is significant interest from domestic institutions and other investors which could look at a 4-5 per cent stake in the bank," said Vir.

To enable further dilution of equity, the bank plans to raise the cap on investments by foreign institutional investors (FII) from 24 per cent currently.

The maximum permissible limit on FII investment in a bank's capital is 49 per cent. The extraordinary meeting of DCB shareholders will be held in January to consider the capital raising proposals.