Dena Seeks Nod For 130 New Branches

"We would like all the new branches to be located in the urban and metropolitan areas," Dena Bank chief executive officer Ramesh Misra said in Mumbai yesterday.

The bank plans to focus on deposit mobilisation in major metros, the stronghold of the new private banks.

Post-public issue, the capital adequacy ratio of Dena will go up to 11.50 per cent from the current level of 8.27 per cent.

"We will be in a better position to extend our risk-weighted assets after the issue," Misra said.

After the issue, the capital base of the bank will increase from Rs 146.82 crore to Rs 206.82 crore.

 

Last year, it slashed its capital base from Rs 283.11 crore to Rs 146.82 crore by setting off its accumulated losses.

However, the bank plans to show the loss as carried forward in 1996-97 to the Income-Tax authorities to get the tax benefit. "If we are allowed to get tax exemption, there will be a substantial increase in the net profit of the bank," one Dena executive said.

The bank registered a 72 per cent jump in net profit in 1995-96 at Rs 51.69 crore, up from Rs 30.02 crore in 1994-95.

The bank will also be able to boost its tier-two capital following the public issue. Dena mobilised Rs 92.13 crore through a subordinated seven-year debt issue in January 1996.

However, it could use only Rs 52 crore of the debt issue to boost its tier-two capital, as going by the RBI stipulation, the tier-two capital base has to be restricted to 50 per cent of the tier-one capital. "With the tier-one capital base being expanded, we will be able to use the entire proceeds of the bond issue to boost the tier-two capital base," Misra said.

According to many merchant bankers, the Rs 20 premium on Dena Bank's equity shares is fixed at an earnings per share at Rs 3.52 in 1995-96 and at a price to earnings (PE) multiple of 8.52.

The average return on net worth in 1994-95 and 95-96 was 20.57 per cent.

Post-issue, the government holding in the bank will come down to about 71 per cent, with the rest being held by the public. Dena will be the second nationalised bank to dilute the government's stake after the Banking Regulation's Act was amended, allowing 49 per cent public equity in public sector banks.