Canbank Seeks Approval For Public Issue

An official of the bank handed over the request for clearance to the finance ministry yesterday.

The board of directors had passed a resolution last Friday asking the management of the bank to go ahead with the initial public offer.

Since the bank is wholly owned by the government of India, parting with even a part of the equity has to be formally approved by the shareholders.

Although it is just a formality, sources in the bank said, the finance ministry may take some time to process the application and decide whether the bank should offer 15 or 25 per cent of the equity to the public.

 

On the premium issue, a Canara Bank official said, the government would have its say and the ministry was not likely to prune the premium.

Once it gets shareholder approval, the bank would seek the concurrence of the Reserve Bank of India.

Canara Bank's present equity base stands at Rs 484 crore after it transferred Rs 106 crore to capital reserve which was permitted by the government of India.

The bank has been advised by 14 leading merchant bankers that a hefty premium of Rs 180 could be had if the bank offloads 15 per cent stake and Rs 130 if the offer is 25 per cent of the equity of the bank.

We have notified Reserve Bank of India of our intentions but a formal application seeking its approval will be made once the shareholders' approval is on hand, said an official of the central bank.

Since both Reserve Bank of India and the finance ministry are represented at the board, its unanimous approval can be interpreted as an in-principle approval for the issue by both these institutions, he said.

We may face some hurdles in Reserve Bank of India as the central bank is expected to take the strength of the bank as well as the intrinsic value of the share, a source said.

Some of the directors at the last board meeting had opposed the hefty premium and the decision to go ahead with the selection of the merchant bankers even before obtaining the approval of its shareholders or Reserve Bank of India permission.

Sources in the bank refuted this, saying nothing of that sort happened.

An official, however, confirmed that opposition from these members had stalled the move to shortlist eight merchant banking outfits.

Since the largest Indian banking outfit State Bank of India got lesser premium and Canara Bank continues to carry the millstone in the form of scam-stained Canfina and Canmutual, sources in Reserve Bank of India said: We have to closely scrutinise the claims and projections made by the bank before taking a view on this.

Reserve Bank of India officials also said that ultimately what matters to us is the interest of the depositors and the credibility of the banking system as such.