Uco Bank explores every option for capital raising

KOLKATA: Uco Bank has reached out to the government as well as the Life Insurance Corporation of India (LIC) for raising capital on a preference basis even as the state-owned lender has started preparing for share sales in qualified institutional placement.

The bank has got its board's approval to raise Rs 3000 crore after the Reserve Bank of India suggested every lender to create a capital buffer against anticipated credit risk as a fallout of the coronavirus pandemic.

Uco is trying to explore every option as the capital raising is going to be fiercely competitive with bigger lenders such as State Bank of India and Punjab National Bank lining up their mobilisation plan from this quarter.

Uco chief executive AK Goel said that the bank has floated RFP (request for proposal) for selecting merchant bankers for the QIP. "The market is not conducive. We are waiting and watching the scenario closely," Goel said Thursday. He said the size of the QIP could be anything between Rs 500 crore and Rs 1000 crore.

The government holds 94.44 per cent in the bank while LIC holds 2.26 per cent. LIC is allowed to hold up to 15 per cent. If the life insurer goes to the full extent, it may translate into about Rs 1500 crore investment.

"We have approached LIC to invest on a preferential basis. It may also on-board when we float the QIP," Goel said. "We are also trying to conserve capital by reducing credit cost," he said.

Uco had approached LIC last year too for capital but it did not respond positively.

The bank reported a net profit of Rs 30 crore for the quarter to September as against net loss of Rs 892 crore. Operating profit stood at Rs 1330 crore as against Rs 1207 crore.

Its gross non-performing assets ratio (NPA) improved to 11.62 per cent as of September compared with 21.87 per cent a year back.

Uco has fulfilled all the criteria to get out of RBI's prompt corrective action framework after March quarter but the regulator is yet to take a call.

"Maybe the regulator is looking at the possible impact of the pandemic," Goel said.