Should its collections fall below Rs 135 crore, the bank will have to refund the entire amount collected from investors.
Unlike other companies that are allowed to keep the subscription only if the issue is subscribed to the extent of 90 per cent, banks are allowed to retain whatever they are able to collect. But Dena Bank had to agree to a minimum size because exchanges refuse listing unless 25 per cent of a company's shares are with the public.
Dena Bank is offering 29 per cent of its shares to the public, and the cut-off level of 25 per cent is Rs 135 crore, bank chairman Ramesh Mishra said.
The premium, he said, had been kept low (Rs 20 per share) in view of the depressed state of the market.
The average return on the bank's net worth has been 20.57 per cent in the past two years.
After the issue, the bank's capital adequacy ratio will rise from 8.26 per cent to 10 per cent. Dena Bank's operating profit rose 72 per cent to touch Rs 145.49 crore in 1995-96.
The bank has managed a 18 per cent growth in advances despite a 12 per cent increase in deposits.
"We had some surplus funds of the earlier year because of the low off-take of credit at the time," Mishra said.
Dena Bank managed to raise Rs 92 crore on a Rs 40-crore bond issue earlier this year, and retained the entire amount of subscription. The bank's non-performing assets have been brought down from 21.97 per cent in 1992-93 to 13.20 per cent, Mishra said.
"Our books are clean because the government has allowed us to adjust accumulated losses of Rs 136 crore against the bank's capital," he said.
