Development Credit Bank, promoted by the Aga Khan Fund for Economic Development (Akfed), is making way for Tata group?s re-entry into the financial sector by offering it 4.6% stake in the business for Rs 85 crore.
DCB is poised for a preferential allotment of 16.6% shares to raise Rs 300 crore. Besides the Tatas, UAE-based Al Bateen Investment Co, GRA Finance Corp, DCB Investments and Mark Favour of Mauritius are going to pick up stakes. Akfed?s stake will come down to 25% from 29% at present after the preferential offer.
Gautam Vir, managing director & chief executive officer of the bank, said while Tata and Al Bateen will pick up 4.6% stake each, others will pick up 3-3.5% each.
The Tatas may raise their stake if the Reserve Bank of India (RBI) relaxes banking norms in 2009. But, at present, the RBI regulations do not permit Indian companies to invest heavily in the banking sector.
Chairman Naseer Munjee said DCB is in the process of strengthening its balance sheet. After the fresh infusion of Rs 300 crore, the bank will have a capital adequacy ratio of 18% and its net worth will increase to Rs 600 crore from Rs 315 crore currently. The bank?s current balance sheet is of Rs 5600 crore, Munjee said.
DCB, which incurred a loss of Rs 160 crore in 2004-05 and Rs 85 crore in 2005-06, turned around in 2006-07 by posting a net profit of Rs 7 crore.
Vir said the buoyant property market has helped the bank in recovering non-performing assets (NPAs), which has been the main driver of DCB?s turnaround. The bank?s net NPA has come down to 1.5% in the first quarter of the current fiscal from 5% at the end of the 2006-2007. DCB now has 67 branches across the country and five extension counters. The RBI has permitted it to open eight new branches and relocate three. One of the branches is being relocated from Mumbai to Kolkata, Munjee said.