The Hindu Business Line : IDBI Bank to go for rights issue

IDBI Bank proposes to go in for a rights issue, shelving, at least for the time being, all other plans to raise capital. The bank's board is meeting on May 19 to consider an issue of shares to existing shareholders, the bank informed stock exchanges on Monday.

The size of the issue and the price at which the shares will be offered is to be finalised at the meeting.

Talking to Business Line, an IDBI Bank official, said, "This is our present plan to raise capital. To what extent the capital requirement of the bank will be met by the rights issue will depend on the size of the issue.''

Asked whether the scout for a foreign investor is still on, the official said , "This is our present plan for raising capital and all other plans have been put on the backburner.'' The bank has been considering several plans for capital-raising including issue of fresh equity in the past one year. It floated a Rs 45-crore subordinated debt issue in March 2003. Earlier the bank had plans to raise anti-dilutive tier-I capital by placing 26 per cent fresh equity share capital, which translates to around 4.9-crore equity shares with financial/private equity investors.

The bank starved of capital — with its capital adequacy ratio at 9.56 per cent as on March 31, 2003, a tad above the mandatory minimum of 9 per cent — has had minimal incremental growth in corporate lending for 2002-03. The bank's capital adequacy ratio has been hovering at the 9 per cent mark for the past three quarters.

The bank can raise a maximum of another Rs 15-20 crore capital through the subordinated debt route. The constraint is due to RBI's norm that subordinated debt should not be more than half of the Tier I capital of the bank.

IDBI Bank posted a 56.2 per cent increase in net profit for the quarter ended March 31, 2003 at Rs 16.4 crore up from Rs 10.5 crore in the corresponding period in the previous year. The profits are attributed to the increased fee-based income and the higher net-interest income due to a growth in retail customer assets.

For the full year ended March 31, 2003, the bank clocked a 35.7 per cent jump in net profit at Rs 71.1 crore up from Rs 52.4 crore in the previous year.

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