Dhanalakshmi Bank planning private placement to satisfy capital adequacy ratio and net worth requirements

Kerala-based private sector bank Dhanalakshmi Bank is planning a private placement of less than 5% of its equity shares as part of its capital-raising plans. These include a follow-on public issue to increase its net worth to the minimum limit of Rs. 300 crores as stipulated by the Reserve Bank of India (RBI).

36.69% of the bank is owned by Andhra Pradesh-based industrialist P Raja Mohan Rao. Dhanalakshmi seeks to raise Rs. 60 crores through the private placement and another Rs. 55 crores through a qualified institutional placement. The remaining amount will be raised through a public issue later. Currently, the bank has a net worth of Rs. 119 crores. The private placement procedure will be completed by March-end 2007. As of December 2006, the bank’s capital adequacy ratio stood at 9.66%.

The bank will sell a little less than 5% through private placement as selling anything above that requires RBI permission. The bank is currently in talks with four to five investors at present, and has been approached by venture capitalists, other banks, high net worth individuals and corporate groups as of now. The bank is willing to sell its equity to only small-sized corporate groups and not to the large ones.

Read the article in Business Standard.