BackWealthy NRIs buying shares in Kerala’s private sector banks
NRI businessman Yusuff Ali has picked up close to 5% in Dhanlaxmi Bank from the market in the last two months
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Mumbai: Wealthy non-resident Indian (NRI) businessmen are buying shares in medium-sized private sector banks of Kerala, hoping for a rise in valuations, even as the Reserve Bank of India (RBI) is preparing licensing norms for a new set of private banks to enter the country’s ₹ 81 trillion banking industry,
NRI businessman M.A. Yusuff Ali, head of Abu Dhabi-based Emke Group and known for his proximity to the ruling Congress leadership in the southern state, has picked up close to a 5% stake in Dhanlaxmi Bank Ltd from the market over the last two months. Two officials at Dhanlaxmi, who spoke on conditions on anonymity, confirmed the transactions.
“I have always been a keen investor in Kerala and wish to play my small part in further strengthening these prominent Kerala-based banks to make them more competitive in sync with the new generation banks," Ali said.
With this latest acquisition, Ali has invested close to ₹ 510 crore in Kerala banks, he said.
He had acquired less than 5% stake each in Federal Bank Ltd and Catholic Syrian Bank Ltd (CSB) in the past.
In 2010, brokerage Edelweiss Capital Ltd raised its stake in CSB to 4.9%.
In a separate deal, Kerala-based Muthoot Pappachan Group had picked up a more than 3% stake in CSB.
Between 2010 and 2012, Ali served as an independent director on the board of state-run Air India Ltd for nearly two years but quit the position, citing his inability to contribute to workers from Kerala employed in West Asia through Air India.
Besides, Ali is also a director of the proposed low-fare international airline project of the Kerala government, Air Kerala International Services Ltd, a pet project of Kerala chief minister Oommen Chandy.
Two other businessmen—B. Ravindran Pillai, an NRI and an existing shareholder, and B. Mohanachandran Nair, a Kerala-based businessman—increased their stakes in Dhanlaxmi Bank by subscribing to preferential shares.
While Pillai invested ₹ 5.25 crore to raise his stake to 4.62% from 3.96%, Mohanachandran Nair hiked his holding to 2.6% from 1.6% by investing ₹ 6.25 crore.
Recently, the bank had received RBI’s nod to raise ₹ 100 crore from investors, following which it allotted shares to three individuals.
Meanwhile, George Nereparambil, who had agreed to purchase less than 5% of Dhanlaxmi for ₹ 26 crore, has backed out from the deal, because he was uncomfortable with the pricing of the shares. Nereparambil is the second-biggest shareholder in Cochin International Airport Ltd with a 14% stake. The Kerala government is the airport operator’s largest shareholder.
Dhanlaxmi Bank, a subject of takeover rumours in the past few years, is striving to raise capital to safeguard its position amid intense competition. It has been under RBI monitoring since 2011 for its poor financial health and alleged irregularities in operations.
Foreign institutional investors held a 25.25% stake in Dhanlaxmi Bank as on 30 June.
For the quarter ended June, Dhanlaxmi Bank posted a net profit of ₹ 3.58 crore against a loss of ₹ 11.81 crore in the year-ago period.
Gross non-performing assets rose to 5.78% of total loans in the June quarter against 1.39% in the corresponding period last year.
On Monday, Dhanlaxmi Bank closed 4% up on BSE at ₹ 46.35 even as the benchmark equity index Sensex edged up 0.05% to 20,893.89 points. The stock has gained 55.28% since September.
“There could be an emotional element behind such buys by local investors. But in an investment perspective too, such moves make sense as these banks have good network in Kerala and a good share of the state’s foreign currency deposits," said Hatim Broachwala, an analyst at Karvy Stock Broking Ltd.
The RBI is currently in the process of shortlisting candidates to award new banking licences. The apex bank has received 26 applications. These include leading corporations such as Aditya Birla Financial Services Group, Tata Capital Ltd, Reliance Capital Ltd and Bajaj Finserv Ltd, among others.
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