Calcutta, March 25: Dena Bank is looking to raise Rs 366 crore through a preferential allotment of shares to the Life Insurance Corporation of India and the General Insurance Corporation.
The LIC will be putting in Rs 282 crore, while the GIC will invest Rs 84 crore in the bank, which had sought funds to meet its capital adequacy requirements under the Basel III norms. The shareholders approved the capital infusion in an extraordinary general meeting on March 22.
“The bank approached the LIC and GIC for capital infusion to meet the credit requirement of the productive sectors of the economy as well as to maintain regulatory capital adequacy ratios,” Dena Bank said in a regulatory filing with the bourses.
It added that the government, which held a 66.57 per cent stake in the bank as of December, had approved the capital infusion on the condition that its holding would not fall below 58 per cent.
The government has infused Rs 700 crore into Dena Bank as a part of its plan to inject Rs 14,000 crore into 20 state-run lenders in 2013-14.
Following the fund infusion, the Centre’s stake in the public sector lender went up to 66.57 per cent from 55.24 per cent. However, additional capital requirement under the Basel III framework, which will be implemented in a phased manner till 2018, is prompting several PSU banks to turn towards institutional investors, including the insurance companies.
Following the preferential allotment, the government holding in Dena Bank will stand at 58.01 per cent. The bank informed that the allotment would be made within fifteen days of passing the resolutions in the general meeting.
The government has allowed banks to tap into other sources to meet their additional cash requirement. The SBI was the first to exercise this option and raised Rs 8,032 crore through a qualified institutional placement (QIP). The response received by the QIP issue in tepid market conditions prompted some lenders to adopt alternative routes, including the preferential allotment of shares.
The Dena Bank scrip today rose 0.45 per cent to end at Rs 56.15 on the BSE.