Allahabad Bank Preference Shares In Arm To Be Converted

AllBank Finance, the financial services subsidiary of Allahabad Bank, is set to convert Rs 35 crore of preference shares of the parent bank into ordinary shares to restructure its capital base. This conversion would mean the end of any further contribution from Allahabad Bank to its subsidiary.

We have requested the Reserve Bank's permission to allow the conversion of preference shares. We expect the clearance shortly, said a senior Allahabad Bank executive.

AllBank Finance is now heading back to the growth path, with capital restructuring and a detailed action plan being drawn up by it to steer the company on a profits trail. The action plan is expected to be placed before the Allahabad Bank board shortly.

 

In the meantime, the finance arm is also expecting detainting of some of its stocks holdings shortly, which would be a windfall gain for the company. This follows a Supreme Court order, which granted ownership to the stocks held by the banks which were earlier deemed to be tainted. The landmark judgment spells a Rs 25-crore benefit for AllBank Finance, particularly, since its holdings are dominated by blue chips like Castrol and Tata Tea.

AllBank would have to take a decision on whether the stocks would be sold or not, and the subsidiary may actually wait for further entitlements on its holdings before divesting the stocks. We may also keep a part of the holdings and sell the rest, a source said. The detainting would impact the Rs 60-crore capital base of AllBank, which has a Rs 38 crore carried forward loss and reduced the capital to Rs 22 crore. The Rs 25 crore set to be gained on account of the provisioning no longer required for the stocks now detainted, would now be added back to its capital base, taking it to Rs 47 crore.

This would leave a Rs 13 crore balance to be wiped out, which AllBank is expected to do through the action plan which it has chalked out. Castrol and Tata Tea apart, the other stocks which AllBank has in its portfolio are Reliance Industries, Tata Power and ACC.

Allahabad Bank itself is on a turnaround path, with the finance ministry recently allowing a hefty Rs 532 crore writeback of its losses against its equity.