Union Bank plans to raise Rs 800 crore

Union Bank of India will tap the capital market through public offer of eight crore shares which could fetch it about Rs 800 crore to meet Basel-II norms and other business requirements.

This will be apart from its plan to raise Rs 700 crore Tier-II capital this year to keep pace with asset growth as the Mumbai-based bank is targeting a business of Rs 1,22,000 crore this fiscal.

"We may go for public issue of eight crore shares. But not in one go, may be in two tranches," chairman K Cherian Varghese said.

The public offer which could hit market this fiscal will bring down government stake in the bank to 51 per cent from 60.85 per cent.

At the current price of Rs 106 a share, the bank can easily raise up to Rs 800 crore by offering eight crore shares.

The bank is raising capital from market as its capital adequacy ratio is likely to come down to 10.75-11.25 per cent from 12 per cent after implementation of stringent Basel-II norms in 2007 that prescribes for higher provisioning for operational risk.

The bank has set a business target of Rs 1,22,000 crore in 2005-06 from Rs 1,00,000 crore in the previous fiscal.

"We expect deposits to grow by 16.5 per cent to Rs 72,000 crore and advances by 21 per cent to rs 49,500 crore in this fiscal," Varghese said.

The bank is also raising Rs 700 crore Tier-II capital this fiscal keeping pace with asset growth.