Three foreign private equity funds, AIF Capital, Gartmore and Siguler Guff, have together picked up a 14% stake in Thrissur-based Catholic Syrian Bank for Rs 33.3 crore.
The private equity funds made an investment of Rs 190 per share including a premium of Rs 180 per share.
With this investment, the net worth of the bank will go up considerably, according to a release issued by the bank.
The bank, with a capital adequacy of 9.58% at the end of FY07, has been struggling to raise capital.
The bank’s net worth at the end of FY07 was around Rs 229.39 crore against the minimum regulatory requirement of Rs 300 crore.
The bank earlier planned to raise fresh capital through a preferential allotment of about 15% stake to Asian private equity firm, AIF Capital Development.
However, the Reserve Bank of India’s (RBI) guidelines restrict any single private equity firm’s holding in a private sector bank to 5%.
The bank has also been grappling with the central bank’s refusal to transfer the shares acquired by Singapore-based Chawla group, which had purchased about 36% stake in 1997 for Rs 85 a share.
The purchase of shares by the Chawla group was approved by the bank’s board and it also received clearance from the Foreign Investment Promotion Board (FIPB) and the Cabinet Committee on Foreign Investment (CCFI) in early 1997.
However, the RBI rejected the group’s request for transferring the bank’s shares in its name. The only occasion the bank raised capital was in 1999.
It had raised around Rs 26 crore through a rights offer, with Chawla not subscribing to his entitlement.
Highlighting the importance of the capital infusion, VP Iswardas, chief general manager, said, it is an important milestone for CSB and access to additional capital as and when required should no longer be an issue. The bank could look forward to an era of high growth, adding simultaneously to shareholder value, over the next few years.
AIF Capital, headquartered in Hongkong, is one of the largest Asia-based private equity firms with over $1 billion investments in power, infrastructure and banking on a pan-Asia basis.
Gartmore is a London-based independent asset manager with over $50 billion under management and Siguler Guff is headquartered in New York is a multi-strategy private equity investment firm with over $4.50 billion under management.
Source: Business Standard