BoR to raise Rs 150 cr via preferential shares

Posts 30 per cent jump in net profit at Rs 24 crore for September quarter.

Bank of Rajasthan (BoR), a leading private sector bank, is planning to raise around Rs 150 crore through preferential allotment to a group of investors.

The Tayal's promoters of the bank collectively hold 44 per cent and have been under pressure from the Reserve Bank of India (RBI) to dilute promoter holding.

RBI guidelines on ownership restricts any entity from owning in excess of 10 per cent in a bank. The bank will issue 1 crore equity shares on preferential basis to Indus Capital Partners LLC (6.5 million shares) and Max India (3.5 million shares), a Delhi-based fund, at a minimum of Rs 150 per share. The decision was taken at a bank board meeting in Hyderabad today.

"The two funds have already issued offer letters to the bank at a price of Rs 150 per share. The price will be calculated according to Securities and Exchange Board of India guidelines for preferential issue and will get the price, whichever is higher. The fresh issue will lead to 4 per cent dilution in the existing shareholding," said Sanjay Kumar Tayal, director (promoter) of the Bank of Rajasthan.

The bank board, which also considered the financials, announced a 30 per cent increase in net profit at Rs 24 crore for the quarter ended September 2007 compared with Rs 19 crore in the corresponding quarter last year. The figure excludes the one-time profit of Rs 37 crore on sale of equity shares of Bharat Overseas Bank.

The yield on advances increased to 11 per cent during the quarter under review, from 9 per cent in the year-ago period. However, on sequential terms, the net profit for the second quarter was down by 20 per cent compared with Rs 30.17 crore in the first quarter of the current financial year. Net profit for FY07 stood at Rs 110.57 crore compared with Rs 15.25 crore in the previous financial year.

Speaking about the bank's future capital raising plans, Tayal said, "This is the first tranche of the proposed preferential issue by the bank. The next tranche could be of a similar size and would be issued some time next year."

The bank will call for an extraordinary general meeting in a couple of months to get its approval for the same.

"Though we do not require funds immediately, the resources raised through the issue of preferential shares will certainly strengthen the bank and its bottom line," said Tayal.