Federal Bank may resort to postal ballot for capex nod

Federal Bank will be finalising the process of postal ballot soon for getting the shareholders' consent for raising its capital base by Rs 350-450 crore by early next month, said K S Harshan, executive director of the bank.

The issue has remained undecided since the last annual general meeting held on September 27, 2004. He said that an approval from the Securities & Exchange Board of India (Sebi) is just a formality and the issue will commence by September.

He also added that the bank has two options, a public issue or a global depository receipt (GDR) route, but the decision is yet to be taken by the board.

But sources at the bank told Business Standard that the GDR route is a distinct possibility since the target is rather high.

The bank had gone for its maiden public issue in 1994 and it is for the first time it plans for a GDR issue.

It also said that the GDR route is more advantageous to ICICI Bank, which has a 20 per cent stake in the bank. ICICI Bank has to cut down its stake by 10 per cent by 2008 as per the Reserve Bank of India (RBI) guidelines.

If the GDR move gets nod, ICICI Bank's stake will come down by at least 5 per cent, but it can retain its control over the bank.

The bank had proposed to increase the capital base by Rs 200 crore in the last AGM, but the resolution was not approved. So it turned to postal ballot route which is in the final stage now.

Meanwhile, Federal Bank is exploring the possibility of working together with Karnataka Bank and Karur Vysya Bank. This is in the light of a takeover move of Federal Bank by some other banks. Sources said that the takeover threat still exists.

This old generation private sector bank is fancied by both Indian and foreign banks. Federal Bank had made a profit of Rs 90 crore in 2004-05.