Lord Krishna Bank, BoR plan preferential issues

Lord Krishna Bank and Bank of Rajasthan (BoR) plan to come out with preferential allotment of equity shares.

The move follows the need to adhere to the Reserve Bank of India's (RBI) draft guideline to reduce promoters' holding in the banks to 10 per cent.

The funds are also being raised to boost their capital base.

The RBI guidelines released in August stated that no single entity should hold more than 10 per cent in a private sector bank.

Federal Bank had planned a rights issue subject to board's approval. However, the plans have been stalled on account of the legal tussle between ICICI Bank and Federal Bank, said a bank official.

Meanwhile, Lord Krishna Bank and BoR will each make a preferential allotment of Rs 100 crore by the end of fiscal 2005.

DSP Merrill Lynch has been given the mandate to scout for a strategic investment partner for the bank.

The issue will boost the bank's capital to Rs 300 crore, said R M Nayak, managing director and chief executive officer, LKB.

This will also enable the bank to adhere to private ownership guidelines issued by the central bank, he added.

The major shareholders in LKB "" Mohan Puri, director and Dabur Group "" hold 65 per cent and 6 per cent stakes, respectively.

BoR is expected to make a preferential allotment to foreign institutional investors, mutual funds, private equity investors among others.

The allotment will be complete before January, said the bank's chairman, Pravin Kumar Tayal.

Post-allotment, promoters' holding in the bank will reduce to 38 per cent from 46 per cent, he added.

According to sources close to the development, Metlong Investment and Development USA Ltd and Citicorp are expected to pick up stakes in the bank.

The allotment is likely to happen at a premium of around Rs 70-84 per share, he added.

On the Bombay Stock Exchange (BSE) on Friday the bank's scrip dipped by 4.34 per cent to Rs 41.85.

Post-allotment, the bank's paid-up capital will increase to Rs 123 crore from Rs 107 crore, said Tayal.