By CL Jose
Issue size pegged at Rs130 crore including premium (if any)
KOCHI/March 18-2022: The soon-to-be launched rights issue of Dhanlaxmi Bank, the smallest bank from Kerala, is likely to be priced close to its face value of Rs10.
An official filing made by the bank to the stock markets said the bank’s board has proposed the plan to boost its capital base by Rs130 crore through a rights issue, which is yet to be priced though the book value of the bank’s share is computed at about Rs34.15.
Rights shares can only be subscribed by the existing shareholders. The bank with a paid-up capital of Rs253.01 crore and a net worth of about Rs850 crore (tangible net worth at Rs650 crore) as on December 31, 2021, enjoys a capital adequacy ratio of 13.13 per cent.
“The Board of Directors at its meeting held on March 17, 2022, has inter-alia considered and approved the augmentation of paid-up capital by issue of equity shares on a rights basis for an aggregate amount not exceeding Rs130 crore (including premium) to the eligible Shareholders of the bank,” the bank said in its filing to the stock markets.
Talking to businessbenchmark.news, a stock broker said, the pricing of the rights issue will be a challenge to the bank management as the share has been trading, of late, in the vicinity of its face value of Rs10.
The Dhanlaxmi share has been trading below Rs15 for the past three months with the lowest closing at Rs12 during the period showing up on February 24.
“Though Rs130 crore has been mentioned as the aggregate amount to be raised including the share premium, most of this fund will likely add up to the share capital as the bank may not stand a chance to charge anything discernible as premium, above the face value. Moreover, the equity dilution engendered by the rights issue also will have its bearing on the issue price,” an analyst noted.
The bank that reported a minuscule profit of Rs2.03 crore for the quarter ending December 31, 2021, sits on a gross NPA of Rs569.87 crore (7.55 per cent) and a net NPA of Rs277.72 crore (3.83 per cent) as of end Q3, FY22.
