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Vijaya Bank plans to merge home loan arm

Calcutta, Sept. 21: Vijaya Bank is considering a proposal to merge its housing finance arm — VIBANK Housing Finance Ltd (VHFL) — with itself.

Bank sources said National Housing Bank, which holds a 12 per cent stake in VHFL, has given a nod to the proposal.

The equity base of VHFL is Rs 10 crore in which Vijaya Bank holds 88 per cent stake. Sources said Vijaya bank was in the process of appointing a consultant to help the merger process. The bank expects to complete the merger in the current financial year.

Sources said shrinking spreads following a fierce competition in the housing loan segment had prompted the bank to consider the merger.

“There is also a competition between our own bank and the housing subsidiary. Moreover, the administrative cost will come down following the merger,” bank sources said. There are 10 branches of VIBANK Housing Finance across the country.

Vijaya Bank itself is giving thrust on the housing loan. According to sources, some of its small-scale industry branches will also give housing loans.

Vijaya Bank has decided to tap the market with its second equity issue.

The bank is offering 10 crore equity shares of Rs 10 each for cash at a premium of Rs 14 per share aggregating Rs 240 crore. It is set to open for public subscription in the first fortnight of October.

The bank will utilise the equity proceeds for its regular business activities, which is in line with the estimated growth in risk weighted assets. This public offering will increase the bank’s equity capital to Rs 433.52 crore from Rs 333.52 crore as on March 31, 2003.

After this issue, the holding of the government will come down to 53.87 per cent from 70.02 per cent.

The bank’s capital adequacy ratio, which is currently at 12.66 per cent, will go up to 15 per cent.

SBI Capital Markets, DSP Merrill Lynch, JM Morgan Stanley and A. K. Capital Services are the lead managers to the issue.

The total deposits of the bank stand at Rs 17,020 crore as on March 31, 2003. The net non-performing assets of the bank have come down to 2.61 per cent of its net advances in March 2003 from 6.02 per cent in the previous year.

The bank, founded by A. B. Shetty and other farmers on October 23, 1931 in Mangalore, Karnataka, was essentially aimed at promoting the banking habit among the farming community of Dakshina Kannada district in Karnataka. It became a scheduled bank in 1958 and was nationalised on April 15, 1980.

The bank’s first IPO for Rs 100 crore brought down the government’s stake to over 72 per cent from 100 per cent.

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