South Indian Bank eyes higher FII holding cap at 59%; may issue fresh equity

KOLKATA: South Indian Bank is planning to seek government’s permission for a higher foreign holding limit at 59 per cent compared with the current 49 per cent, while it may issue fresh equity shares to fund growth.

The bank would require Rs 760 crore capital given its plan to achieve around 20 per cent business expansion this fiscal without diluting the capital adequacy ratio below 12 per cent, chairman Amitabha Guha told ET. The capital will be garnered through equity or debt or through a combination of both.

The bank’s existing 49 per cent foreign institutional investment limit includes 10 per cent holding by non-resident Indians. The bank has now proposed to keep a 10 per cent separate headroom for NRIs over and above 49 per cent FII holding.

It will soon request the Foreign Investment Promotion Board (FIPB) for raising the limit to 59 per cent, Guha said.

The private sector lender has taken shareholders’ permission to issue up to 20 crore equity shares with Rs 1 face value. At Tuesday’s closing price of Rs 23.25 on BSE, the value of 20 crore equity shares would have been Rs 465 crore.

Shareholders’ have also created an enabling provision for it to raise up to Rs 1,000 crore debt capital.

"The board will later take a call on the window, timing of the issue and quantum of capital to be raised," Guha said. "We are confident that we would be able to achieve 20 per cent growth this fiscal."

Last year, the bank had scrapped a Rs 400-crore qualified institutional placement plan after failing to attract domestic investors due to adverse market condition, while its foreign equity holding was close to the sanctioned limit of 49 per cent.

The bank is more pressed this year for fresh capital, without which the CAR would fall to 10.14 per cent at the end of this fiscal from 12 per cent on March 31, keeping the growth plan in mind.

Its looks to grow total business to Rs 1.09 lakh crore by March 31, 2016 from Rs 89000 crore on March 31. 2015.

The lender’s first quarter profit slipped 48.4 per cent year-on-year at Rs 65.29 crore, due to lower net interest income and other income and despite the fall in provisions & tax expenses.