UCO Bank to raise Rs 271 crore equity from LIC

KOLKATA: State-run UCO Bank said it will raise Rs 271 crore from Life Insurance Corporation of India in preferential allotment of equity shares at Rs 37.74 apiece.

Uco Bank is one of the many lenders which are placing shares with LIC on preferential basis to bring down government stake and raise public holding. Banks need capital also to meet Basel III stringent capital norm.

The preferential allotment of 7.17 crore equity shares will raise LIC's stake in Uco Bank to 14.5% from 10.38% at present, the bank said in a notice to National Stock Exchange. The bank held an extraordinary general meeting on November 5 where shareholders approved the capital raising plan.

Consequently, the government holding will stand reduced to 76.67% from 80.36%. Public shareholding will increase to 23.33% from 19.64%.

Uco shares closed Monday at Rs 33 on NSE, rose 0.76% from last week’s level.

Listed companies are required have a minimum 25% public holding, according Securities & Exchange Board of India norm. However, regular infusion of government capital in state-run banks raise the government holding beyond the 75% limit. Sebi has mandated these lenders to bring it down by September next year.

Under Basel III, banks need to keep higher capital to cover credit risk. For instance, Uco's capital adequacy ratio was 10.59% at the end of June under Basel II, but it was a lower 9.9% under Basel III rules.