Dhanlaxmi Bank raising $37.5M from DHFL promoter, NRI businessman among others

Kerala-based private sector lender Dhanlaxmi Bank Ltd is raising around Rs 233 crore ($37.5 million) through a preferential allotment to a group of investors, including Kapil Wadhawan, chairman and managing director of Dewan Housing Finance Corp Ltd (DHFL), according to a disclosure on BSE.

The firm is planning to issue 59.6 million equity shares in total to a group of 10 individual investors. Other investors who will subscribe to the shares include BK Raveendran Pillai, Bimal N Mehta, Ashok J Jain, Pinki K Thakural, Parmindar Singh, Kalpesh M Mehta, Sumit Bakshi, Suraj A Muchhalla and Mahesh Dalal. Except Pillai all others are new investors and will pick 3.34 per cent stake each.

NRI businessman Pillai is already one of the single-largest shareholders of the private bank holding 4.17 per cent stake which would go up to 4.9 per cent post issue.

Following the news, the company’s stock rose as much as 20 per cent in the intraday trading on BSE and closed the day at Rs 34.60, up 15.91 per cent in a strong Mumbai market on Tuesday.

The lender will use the money to augment the long-term tier 1 capital base of the bank to meet growing business needs and to facilitate the additional capital requirements under the Basel II norms, Dhanlaxmi Bank said in the disclosure. The issue will be at Rs 39 per share.

Post the issue, resident investors will hold 47 per cent stake in the bank; foreign institutional investors 22.79 per cent and non-resident Indian investors 20.77 per cent of the expanded equity base.

This would mark the third round of funding for the bank in the past one year. Early last year it raised Rs 51 crore from a group of private investors, including Pillai. In December, it went to raise Rs 67.2 crore through a qualified institutional placement (QIP).

These transactions came over two years after a planned funding round was scrapped. In mid-2011 Dhanlaxmi Bank had disclosed that US-based Customers Bancorp and three PE firms have decided to withdraw from the preferential allotment worth Rs 290 crore. Other private equity investors in the issue included Mount Kellet Capital (a private equity firm run by former Goldman Sachs partner Mark McGoldrick), Wolfensohn Capital Partners (equity fund promoted by former World Bank chief James Wolfensohn) and Multiples.

The bank has gone through a tough period since then and saw changes in top management.

During the quarter ended December 31, 2013, Dhanlaxmi Bank posted its largest quarterly loss of Rs 119 crore against a net profit of Rs 4.39 crore in the year-ago period, as the bank had to set aside Rs 112 crore in provisions to cover for rising bad loans.

(Edited by Joby Puthuparampil Johnson)

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