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Monday, March 22, 2010

UCO Bank plans follow-on offer to raise Rs 400 cr

UCO Bank, according to its Chairman & Managing Director, S K Goel, has decided to raise capital by way of a follow-on public offer (FPO) instead of a Qualified Institutional Placement (QIP), the objective being to broadbase the shareholding.

The bank proposes to issue six crore equity shares at a face value of Rs 10 each. This, coupled with the premium, should help the bank raise about Rs 400 crore, Goel said pointing out that the offer would hit the market by end-May.

Earlier, the bank, at its extraordinary general (EGM) on March 2, had taken shareholder's approval to raise funds either through an FPO or QIP. The bank has already received the approval of its board, Government and the Reserve Bank of India for the FPO.

Though QIP was a cheaper route vis-à-vis FPO, the government favoured an FPO on the ground of broadbasing of ownership, unlike QIP where shares would be concentrated in a few hands, Goel said. “The cost for a QIP issue works out to less than one per cent while the same for an FPO is close to three per cent. However, FPO is broad based as compared to QIP,” he observed.

The proposed FPO, when completed, would bring down the government stake in the bank from 63.59% to 58.60%, he said.

UCO Bank, Mr Goel said, was hopeful of receiving capital infusion of Rs 500 crore from the government under the recapitalisation scheme by the end of this fiscal.

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