Dhanlaxmi Bank plans to raise Rs 1,100-cr to take on competition

MUMBAI: Dhanlaxmi Bank may sell shares or global depositary receipts to private funds and mutual funds to raise Rs 1,100 crore to improve its capital position ahead of the likely entry of new private banks and larger role for foreign banks.

“We plan to raise money simultaneously through all three routes by the month of May,” MD and CEO Amitabh Chaturvedi said in an interview with ET.

The bank, which reported a five-fold increase in net profit for the third quarter at Rs 7.26 crore, aims to be among the top-five private banks by 2015-16 in terms of loans and profitability.

About Rs 300 crore would be raised through the sale of shares on a preferential basis, another Rs 350 crore to Rs 400 crore through GDR and the balance Rs 300 crore through sales to qualified institutional investors like mutual funds, banks and foreign institutional investors, Chaturvedi said.

“The bank may allot shares to four investors under the preferential allotment route. All the four would hold about 5% stake and have a lock-in period of one year,” he said without disclosing potential investors.

“They are big players in India. But I don’t think any one of them holds banks in portfolio as such.” The allotment to private equity investors would be subject to RBI approval.

After the share sales, no single shareholder will hold more than 4.9% stake. In 2002, P Raja Mohan Rao held 37% of the bank and was forced to reduce his stake to 10% following instructions from the Reserve Bank of India that no single entity could hold more than 10% in a bank.

The board has approved plans to issue 5.5 crore equity shares, which will result in 40% equity dilution. The fresh equity of Rs 1,000 core will enable the bank to lend Rs 25,000 crore. Currently, it has a loan portfolio of 7,750 crore, up 75% over the corresponding quarter a year ago.