Dena firms up Rs 100 crore public offering plan

Dena Bank has firmed up plans of approaching the primary market with an issue of over Rs 100 crore that will bring down the government's holding in the bank to 51 per cent from 71 per cent.

The issue is slated to hit the market in June this year. It is also in the process of raising Rs 150 crore from the bond market, as Tier-II capital.

"The total size of the public issue is likely to be a little over Rs 100 crore, where 20 per cent of the government's stake in the bank will be offered at a premium," explained the chairman and managing director of the bank, A K Khandelwal.

Khandelwal however said that the shares were hovering around Rs 25 at the stock market and the premium was likely to be fixed with reference to this price. Sources close to the development said that the issue was likely to be priced over Rs 25.

Dena Bank is likely to raise Rs 100 crore of Tier-II bond at 6.2 per cent with a green shoe option of retaining Rs 50 crore. "Our capital base is around Rs 206 crore and the room for Tier-II capital was Rs 150 crore, which we will exhaust this year. After having exhausted the room for Tier-II, we will go for the Tier-I capital in June this year," he explained.

On the operational front, Khandelwal expects to achieve a Rs 29,000 crore business volume, Rs 19,000 crore of which would from deposits while Rs 10,000 crore from advances.

The bank's capital adequacy ratio at present is however below the Reserve Bank of India stipulated threshold level of 9 per cent at 8.64 per cent. "We are hopeful of achieving 9 per cent by March end. Our CAR last year was around 6.02 per cent which we managed to increase to 8.64 per cent," the CMD explained.

The bank's net non-performing level was also higher than the RBI stipulated level at 11 per cent. "This year we hope to recover around Rs 450 crore including write-offs, cash recovery and upgradation. By the end of next fiscal the net NPA is also slated with come down to around six per cent," he added.

"We have jacked up our NPA recovery mechanism. Every branch manager has been given some NPA recovery targets which is yielding results," Khandelwal explained.

The bank is also banking heavily on retail business, which expects to increase to 15 per cent from 6 per cent at present. Business from the SME sector is also slated to rise to 16 per cent from 12 per cent as of now.