Indian Bank, a state-owned lender, has turned down Life Insurance Corporation's offer to purchase a stake in the bank through the preferential allotment route.
This is because the bank is well-capitalised and for the same reason no capital infusion requests have been made to the Government as well, Mr T.M.Bhasin, Chairman & Managing Director of Indian Bank, said here today.
The move to turn down LIC's offer came at a time when the insurance behemoth is acquiring 5 per cent stake in a number of public sector lenders that had been looking for capital to fund business growth.
Mr Bhasin also said that the bank has no plans to come out with a follow-on-public offer (FPO) this financial year, even as it already holds Government permission to dilute as much as 10 per cent equity in the bank. The Centre currently holds 80 per cent stake in the bank.
Indian Bank had in 2011 received the Government's nod to issue 6.14 crore shares at a premium, which could bring down the government holding in the bank by 10 per cent. However, in view of the comfortable capital position and good retained earnings, the bank has decided against any FPO this fiscal.
“Next financial year, the FPO depends on profit accretion – plough back into balance sheet. Based on that we will take a call. It also depends on the market conditions. Market has started improving. If we get good pricing, we will consider it. We will take a call only after April 2012 when audited results for the current fiscal are finalised,” Mr Bhasin said.
The bank's capital adequacy – if we include the profits of first three quarters – is at 13.56 per cent, of which tier-I capital is 11.29 per cent. Indian Bank has headroom to mobilise Rs 6,200 crore as Tier-II capital. However, in view of the comfortable capital position, it has decided against raising Tier-II capital this fiscal, Mr Bhasin said.
krsrivats@thehindu.co.in