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Development
Credit Bank offloads stake to Tatas
11 July 2007
Mumbai:
Tata Capital, the new financial services arm of the Tata group, is picking up
4.6 per cent stake in private sector lender Development Credit Bank (DCB) for
around Rs85 crore. DCB,
promoted by the Aga Khan Fund for Economic Development (Akfed), is selling 16.6-per
cent stake to five investors for raising around Rs310 crore, a senior official
of the bank said. The bank now caters to small and medium scale companies. The
other investors who will pick up stakes in the bank include the UAE-based Al Bateen
Investment Co, GRA Finance Corp, Mauritius, DCB Investments, Mauritius and India
Capital Opportunities 1, Mauritius. DCB
Investments is a special purpose vehicle floated by Schroders, a UK-based asset
management company, to invest in the private sector bank. The
Tata group is staging a comeback in the financial sector with the acquisition
of a 4.6 per cent stake in the bank for around Rs85 crore, paying DCB at Rs105
per share. "At
this point in time, they (Tatas) have come in as financial investors. We cannot
speak of the future yet." Gautam Vir, MD and CEO of DCB, said, adding that
DCB's investment bankers had shortlisted some names, and the bank had selected
the five based on the profile of each investor. The
Reserve Bank of India (RBI) regulations do not permit Indian companies to invest
heavily in the banking sector. However,
for the Tatas, the investment could be a long-term play, because the RBI is scheduled
to relax banking norms in 2009. DCB,
on the other hand, has been wanting to strengthen its balance sheet. After the
fresh infusion of Rs310 crore through the stake sale, the bank will have a capital
adequacy ratio of 18 per cent, Vir said. Tata
Capital is yet to formally announce a plan of action. Sources say the plan is
to invest Rs5,000 crore in the next 4 to 5 years. Reports
earlier suggested that the Tatas have hired Boston Consulting Group to prepare
a roadmap for its entry into financial services, including the capital market,
merchant banking, housing, auto and other retail finance. DCB
said if RBI approval is not received wholly or partly for any of the proposed
investors, the DCB board shall have the "power to identify and negotiate
with one or more of the investors." The
fresh issue of shares will constitute up to 16.6 per cent of the bank's post-issue
share capital, DCB said in a filing with the Bombay Stock Exchange (BSE). "It
is a financial investment and the clause of 'up to 4.6 per cent' is more an enabling
provision in case the RBI does not approve of one or more of the investors. Post
issue, one or more of the investors will have less than 4.6 per cent stake,"
said Adil Kasad, chief financial officer of DCB. The
preferential allotment is subject to the approval of the bank's shareholders and
the  Reserve
Bank of India (RBI). If
the RBI approval is not received for any of the proposed investor(s), the board
of the private sector bank will have the power to identify and negotiate with
one or more investors or with other interested investors for selling the stake
and will secure the RBI's special approval for the same, said the bank.
Other
reports on Development Credit Bank
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reports on Tata Group Other
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