Kolhapur-based Ratnakar Bank aims to strengthen its capital base over the next couple of months as the private lender prepares for the next phase of growth.
It plans to raise up to Rs300 crore from a group of domestic and international private equity (PE) investors to finance its entry into new regions, expansion of branch network and product portfolio.
The bank has approval from the Foreign Investment Promotion Board (FIPB) to raise funds through preferential equity allotment to foreign institutional investors, foreign residents and non-resident Indians. It has also taken permission to increase the foreign holding in the bank to 55 per cent of the paid-up capital from the current 43 per cent. The Reserve Bank of India has also cleared the proposal.
“The bank’s capital adequacy ratio continues to remain strong (at 18 per cent). It may have decided to augment the capital base as the bank is entering the next phase of growth. FIPB’s clearance for the bank to cross 49 per cent is an enabler to access foreign as well as domestic investors,” a senior banker familiar with the development told Business Standard, on condition of anonymity.
The banker added that foreign shareholding in the bank may not touch 55 per cent because domestic institutional investors will also participate in the fund-raising exercise.
Ratnakar Bank plans to add seven new branches by March-end, taking the total number of branches to 125. Thereafter, the bank plans to add about 50 branches every 12-15 months.
In the banking circles, Ratnakar Bank is often referred to as the NH-4 Bank, since a majority of its business comes from cities in and around the 1,235-kilometre-long National Highway-4. But as part of its NH-4 to NH-8’ strategy, the bank is strengthening its presence in the hinterlands of NH-8.
The bank has partnered Infosys and is using the software outsourcer’s core banking solution Finacle to upgrade its technology platform, which will enable expansion of its product suite and help it build scale.
“The bank has expanded its products suite and is now looking to build scale. Hence, it decided to raise additional capital,” the banker said.
In February 2011, Ratnakar Bank had raised over Rs700 crore from a group of investors that included Housing Development Finance Corporation, Norwest Venture Partners and Cartica Capital.