Indian Bank chairman and managing director M. B. N. Rao in Calcutta on Friday. A Telegraph picture

Calcutta, May 27: Indian Bank will come up with an initial public offering (IPO) of Rs 200 crore by September to garner the additional capital required to expand its operations.

The government’s stake in Indian Bank will be diluted by 30 per cent after the issue to 70 per cent, according to chairman and managing director M. B. N. Rao.

The bank expects to charge a premium of Rs 50 on a share of Rs 10. “We plan to garner Rs 1,000 crore through the IPO,” said Rao. At present, the tier-I capital of the bank is Rs 740 crore.

The bank is in talks with merchant bankers, including SBI Caps, DSP Merrill Lynch and ICICI Securities, for the proposed IPO.

The company had increased the tier-II capital by Rs 300 crore by issuing sub-ordinated bonds.

Its capital adequacy ratio (CAR) now stands at 14.14 per cent. “But we need to increase the CAR to meet the Basel II norms, which becomes effective from April 2007. According to the norms, banks have to enhance the then existing CAR by another 2 per cent,” added Rao.

Rao said the bank is aiming a business of Rs 70,000 crore in 2005-06. In 2004-05, it had registered a total business of Rs 55,000 crore. The bank has set a target of Rs 1 lakh crore by March 31, 2007.

The bank has 1,387 branches and has obtained licences for 26 more.

The net non-performing assets of the bank on March 31, 2005 was Rs 240 crore. Indian Bank has tied up with HDFC Standard Life to sell its products and with United Insurance to sell non-life products.

Rao said, “With a focused approach through a four-year agri credit perspective plan up to 2007, coinciding with the bank centenary year, the bank has doubled agriculture credit in two years and contributed Rs 3,215 crore in this sector.”

Merchant banking

Indian Bank is scouting for a partner for its merchant banking arm ? Indbank Merchant Banking Services. The subsidiary is currently engaged in fee-based activities.

“We are looking for a partner for the subsidiary. If we fail to rope in one, we will strengthen it on our own,” Rao said.