SIB to seek shareholders’ nod to raise up to Rs1500cr

KOCHI: Having grappled with its large bad loan portfolio, which remained an overhang for a couple of years, the South Indian Bank (SIB) now seems to be girding its loins for a period of growth

SIB has decided to seek the shareholders’ approval to raise up to Rs1,500 crore, with Rs750 crore each to be raised through equity and debt routes. The bank has convened its 96^th annual general meeting (AGM) on August 27.

CAR at 18.11%

The bank is comfortable with its current capital adequacy ratio of 18.11 per cent that certainly gives enough headroom for its short to mid-term growth ambitions.

The bank has a paid-up capital of Rs262 crore and reserves to the tune of Rs8,892 crore as of June end 2024.

Rs250cr bond redemption

This is despite the redemption of Rs250 crore Tier 2 bond by the bank on June 26. This portal has also reported the likelihood of the bank redeeming its Rs500 crore Tier 1 bond that carries a coupon of 13.75 per cent, in January next by invoking the earliest call option.

Talking to businessbenchmark.news, a top official of SIB said, “Taking shareholder approval for the fund raising during the ensuing AGM doesn’t mean that the bank is going to raise such capital soon. We are enabling ourselves with the potential to raise capital if needed.”

Slow growth

SIB had slowed down its asset growth in the wake of the emergence of large NPA pool during the past few years. During the tenure of the previous chief executive officer (CEO), Murali Ramakrishnan, he has virtually frozen the loan growth to a good extent and focused on improving the quality of the loan book.

While only 66 per cent of the large corporate loans were rated A and above as of 2021 September, the picture improved a lot in the ensuing years, and as of June end, 2024, such highly rated loans accounted for 98 per cent of the said loan book.

Asset quality improved

As the result of such focused efforts, SIB asset quality witnessed visible improvement. The gross NPA level which stood at 6.97 per cent as of March 2021 dropped to 4.50 per cent towards June 2024.

Net NPA also experienced similar improvement by falling from 4.71 per cent to 1.44 per cent during the same period.

Similarly, the provision coverage ratio (PCR) including the technical write-off, improved considerably from 69.90 per cent to 79.22 per cent during the same period.

“The NPA pains are not yet over. However, a period has come for the bank to focus more on the growth too, and that needs capital. So bank may look to ‘keep the gunpowder ready’ for the next phase,” said a banking analyst.