Issue likley to be priced around face value of Rs10
By CL Jose
KOCHI/August 2022: Centrum Capital has been selected as the merchant manager for Dhanlaxmi Bank’s forthcoming rights issue, according to informed sources.
The rights issue for which the board has in March given its go-ahead is understood to be a 1:2 issue, whereby the shareholders of the bank will be entitled to subscribe to one share against two shares he/she owns in the ‘company’.
The sources close to Dhanlaxmi told businessbenchmark.news that the work for filing regulatory papers with the Securities and Exchange Board of India (SEBI) is being finalised and the issue could hit the market within a few weeks as the formalities for rights issue are simple compared with that of an IPO.
The bank has already informed the stock exchanges that the size of the issue will be up to Rs130 crore, which obviously pegs the offer price at close to its face value of Rs10.
The share closed on NSE at Rs12.45 on Tuesday (August 02) against a book value of Rs35.57 as of March end, 2022.
During the past one year, the share has moved in the price range of Rs17.35 and Rs11 on NSE, according to the data available on the site.
Aims to raise around Rs130 cr
In the event of the issue getting fully subscribed, the paid-up capital of the bank will grow up to around Rs383 crore, by about 50 per cent.
Dhanlaxmi Bank whose capital adequacy ratio or CRAR fell from 14.57 per cent in Q1FY22 to 12.98 per cent as of end-Q4, FY22, requires capital badly if it needs to grow its book, as the current capital offers only very limited headroom for growth as the minimum prescribed by RBI is 11.50 per cent.
More importantly, the bank has announced expansion plan, which will have its new administrative office, and 20 new branches in southern India before long.
Having said that, the bank sees its high cost-to-income ratio, though has fallen from 85.04 per cent in Q1, FY22 to 74.73 per cent as of Q4, FY22, as a tricky issue that eats into the profitability of the bank.
The bank, which is yet to announce its first quarter results in the current year, had come out with an encouraging set of numbers for the fourth quarter of the just-concluded financial year (FY22).
On year on year (YoY) basis, the fourth quarter (Q4) net profit soared 344 per cent. For the financial year FY22, gross advances grew by 18.56 per cent, whereas the bank’s provision coverage ratio (PCR) at 80.64 per cent, is currently one of the highest among Kerala’s banks.
