Dena Bank to raise Rs 366 cr from LIC, GIC in preferential issue

Mumbai: State-run Dena Bank on Tuesday said it will raise Rs 366 crore through a preferential allotment of shares to the public sector insurers Life Insurance Corporation of India and General Insurance Corporation.

Life insurance giant LIC will be putting in Rs 282 crore as part of the capital raising programme, while GIC will invest Rs 84 crore, the city-based lender said in a statement.

The bank's shareholders have approved the share sale in an extraordinary general meeting held recently, it said.

"Bank approached LIC and GIC for capital infusion to meet the credit requirement of the productive sectors of economy as well as to maintain regulatory capital adequacy ratios," it said in a regulatory filing with the exchanges.

The note prepared after the EGM, held on March 22, said the issue price was fixed at Rs 52.91 per share. Dena Bank scrip was trading up 1.07 per cent at Rs 56.50 a piece on BSE, whose 30-share benchmark was trading 0.13 per cent down at 1320 hrs.

However, the timing of the issue and the transaction was not known.

Post issue, the Government's shareholding in the bank will come down to 58.01 per cent from the 66.57 per cent level in December 2013, it said.

With the capital infusion of Rs 700 crore during the third quarter of the current fiscal, the government holding in the bank rose to 66.57 per cent from 55.24 per cent earlier.

It may be noted that the banks are trying to meet a stiff target to comply with the capital-intensive Basel-III framework, which is being implemented in a phased manner in the country till 2018.

The Government exhausted its Rs 14,000 crore recapitalisation budget for various PSU banks in the current fiscal and later allowed them to tap other sources to raise the capital.

State Bank of India, the largest lender in the country, was the first to exercise this option and raised Rs 8,032 crore through an institutional placement of shares.

The response received by the SBI's QIP issue in tepid market conditions prompted some lenders to redraw their strategies and adopt others routes, including the preferential allotment of shares.