Karnataka Bank plans rights, board meet soon

Karnataka Bank Ltd has firmed up plans for a rights issue. The board of directors of the bank will formally discuss the issue at a board meeting to be convened for the purpose soon.

Sources close to the development said that the details of the issue and its pricing would be finalised at a later stage. They also said that the capital raising exercise was being undertaken to augment the capital adequacy ratio of the bank so that it can move towards implementing the Basel II norms.

The capital adequacy ratio (CAR) of Karnataka Bank currently stands at over 13 per cent, and if the Basel II norms were to be applied, it would come down to 9 per cent.

The bank's own funds were estimated at over Rs 700 crore. By the close of this fiscal it was expected to touch Rs 1,000 crore. The south-based bank had augmented its capital through a rights issue March 2003, when it allotted rights basis equity in the ratio of 1:2 at a price of Rs 25 per share including the premium of Rs 15 per share.

This time the premium was likely to be higher as the stock was hovering around at Rs 90. The Bank has however witnessed its stock price nose dive from Rs 124 in May this year to Rs 92 as of now. Karnataka Bank is a professionally managed bank with no promoters.

Goldman Sachs hold around 5.52 per cent, while, Indiabulls Financial Services hold another 3.46 per cent. Medvin Finance also hold around 2.78 per cent in the bank. Non-resident Indian Subramanian Subbiah holds close to 5.5 per cent.

The south-based bank was also gearing up to offer its customers more facilities such as Internet banking, debit card, expansion in ATM network and the multi-city cheque facility.