United Western gets Sebi nod for rights

Satara-based United Western bank has received the Securities and Exchange Board of India's (SEBI) nod for its proposed rights issue of Rs 43.04 crore.

The bank has received an observation letter from the capital market regulator and has informed the Bombay Stock Exchange (BSE) about the book closure and record date (January 24-25), company secretary R J Joshi said.

The bank's capital adequacy ratio (CAR) was 4.86 per cent as on March 31, 2005 and further declined to 3.68 per cent as on June 30, 2005, which is below the RBI-stipulated norm of 9 per cent. The CAR has further slipped to 3.15 per cent by the end of September 2005.

The proposed right issue, coupled with the induction of a strategic investor, will help the bank to meet the stipulated capital adequacy ratio (CAR) of 9 per cent.

The bank plans to issue 1.79 crore equity share of Rs 10 at premium of Rs 14 each on rights basis in the ratio of one equity shares for two shares held on the record date.

Prior to the rights, the bank would allot bonus shares to shareholders in the ratio of 1:5. Following the bonus issue, the paid-up capital would touch Rs 36 crore mark, said Joshi.

The rights shares would be issued on the expanded capital of Rs 36 crore. After rights issue, the paid-up capital will increase to Rs 54 crore. The bank had planned to raise Rs 250 crore by March 2005 and an additional Rs 125-150 crore next fiscal to augment its capital base.

Rating agency CARE had recently downgraded the rating for the bank's Rs 114.70 crore Tier-II subordinate bond issues from 'CARE BB+' to 'CARE B+'.

The downgrade was effected following a decline in capital adequacy owing to losses in the half year ended September 2005, a delay in infusion of Tier I capital and weak asset quality.

The scrip of private sector bank today closed slightly higher at Rs 67.35 on Bombay Stock Exchange compared with its previous close of Rs 67.05.