The bank had its capital adequacy ratio at 15.7% at the end of September and a sharp fall below 13.5% could be triggered by acquisitions, which the bank said it is open to and M&A is a part of its declared strategy for balance sheet expansion.
AgenciesLender open to acquisitions as part of balance sheet expansion, says MD Manian
According to the terms of the agreement, Blackstone would need to pay for the 25% of the warrant issue price immediately while the balance 75% shall be payable within 18 months.
“However, if CAR drops below 13.5%, Blackstone would have to make the balance payment even before the 18-month period,” Manian said at an analyst call on Wednesday.
He interacted with analysts to explain the nuances of the preference share deal by which the private equity investor is set to acquire 9.99% in the Thrissur-based lender through the Asia II Topco XIII for ₹6,197 crore.
Higher advance growth also led to a little fall in CAR but that is typically offset by ploughing back of profits. Manian said that inorganic growth remains one of the ways of balance sheet expansion as guidded in the strategy document prepared by the bank in February. He however did not mention in which asset class the bank may target acquisition. “When opportunity comes, we will evaluate it keeping shareholders value and return on assets in mind,” Manian said.
The bank would issue up to 273 million warrants, each carrying a right to subscribe to one equity share of the bank having a face value ₹2 at ₹227 per share.
The tenure of the warrants is 18 months from the date of allotment.
“The tenure of the warrants may be reduced in accordance with the terms of the investment agreement,” the term sheet said. “The warrants shall be convertible in equity shares in one or more tranches. Any unconverted warrants shall lapse, and the amount paid by the investor on such warrants shall stand forfeited,” it added.