Karnataka Bank, the Mangalore-based private sector lender, plans to seek shareholders’ nod to raise up to Rs 500 crore through a qualified institutional placement (QIP).
A QIP is private placement of equity shares or securities convertible into equity by a listed company with qualified institutional buyers approved by the market regulator, the Securities and Exchange Board of India.
The bank is raising the money to strengthen its capital base and expand credit. Karnataka Bank had advanced Rs 11,800 crore in the previous financial year and is looking to grow this by around 27 per cent to Rs 15,000 crore in the current fiscal.
Bank officials said their effort to raise around Rs 150 crore through a private placement to International Finance Corporation (IFC) was struck down by the Reserve Bank of India. The bank was planning to offer 6.3 million shares of Rs 10 each at a price of Rs 225 a piece on a preferential basis to IFC by divesting 4.99 per cent stake for a little over Rs 140 crore.
Karnataka Bank’s shares on Tuesday closed down around 7 per cent on the National Stock Exchange. Nifty was down almost 3 per cent today. In September last, the bank had raised around Rs 250 crore subordinate debt to beef up its Tier-II capital. Its net non-performing assets (NPAs) stand at 0.98 per cent while its capital adequacy ratio is 11.48 under Basel II and 13.54 under Basel I. Return on assets is 1.25 per cent.
The bank, boosted by a robust treasury income, posted 37 per cent growth in net profit to Rs 83.14 crore for the fourth quarter ended March 31, 2009, as compared with the corresponding period of the previous fiscal.
Total income was up 35 per cent to Rs 641.8 crore for the quarter as it earned interest of Rs 498 crore, up 19 per cent. Boosted by a healthy profit of Rs 66 crore by sale of government securities and bonds, the bank reported 2.5 times growth in other income during the quarter.