Dhanalakshmi plans private placement

Dhanalakshmi Bank, the Kerala-based private bank, plans to privately place a little less than 5 per cent of its equity shares as part of its capital raising plans that include a follow-on public issue to increase its net worth to the minimum required by the Reserve Bank of India (RBI).

The bank, 36.69 per cent owned by the Andhra Pradesh-based industrialist P Raja Mohan Rao, seeks to raise Rs 60 crore through a private placement and another Rs 55 crore through a qualified institutional placement ((QIP). Currently, the bank has a net worth of Rs 119 crore.

"The bank would raise its net worth to more than Rs 300 crore. While approximately Rs 115 crore is being raised through private placement and QIP, the remaining amount will be raised through a public issue later," said V S R Murthy,executive director.

"The bank will sell a little less than 5 per cent through private placement as selling anything above that requires RBI permission. The bank is in talks with four to five investors at present," Murthy added.

Dhanalakshmi Bank has been approached by venture capitalists, other banks, high net worth individuals and corporate groups as of now. However, Murthy clarified that the bank will sell its equity to small-sized corporate groups and not to the large ones.

"By the end of March 2007, the private placement procedure will be completed", said Murthy. He further said the bank is also in talks with four institutional investors for raising around Rs 55 crore through the QIP route, but declined to name the investors.

The bank's capital adequacy ratio stood at 9.66 per cent in December 2006. After the raising the net-worth to Rs 300 crore, the capital adequacy ratio will cross 12 per cent.

The bank's gross deposits total Rs 2,600 crore and advances Rs 1,900 crore. Dhanalakshmi's gross non performing assets (NPAs) till 31 December 2006 stood at 6.31 per cent and net NPA at 2.11 per cent. The bank aims to further bring down its gross NPAs to 5 per cent and net NPAs below 2 per cent.