Andhra Bank to launch IPO despite scam exposure, asset mismatch

The proceeds of the issue will be utilised for acquiring a small bank, Vasanthan said in order to grow. "We are in talks with many small banks for picking up a stake… we will make an announcement soon," he added. The bank is offering 15 crore equity shares of Rs 10 each and post-issue, the government stake would come down to 66.66 per cent.

As per the Janakiraman Committee report which looked into the `securities scam,’ the bank was involved in a total number five cases amounting to Rs 293.34 crore on account of the scam, of which one case amounting Rs 91.36 crore has been settled without any liability devolving on the bank. Moreover, the bank had contingent liabilities of Rs 2,324 crore on account of forward exchange contract guarantees, acceptances and other liabilities.

In another significant disclosure, the bank has said "65.53 per cent of term deposits as on September 22, 2000 are due to mature within one year." The bank may suffer from asset-liability mismatch if a significant proportion of these deposits are not rolled over the depositors," its offer document says.

According to the bank, it has conducted a study on deposits during June 2000 which indicated that on an average, 44 per cent of term deposits get renewed or remains with the bank. Further, its term deposits have grown by 38.82 per cent in 1999-2000 and 41.21 per cent in 1998-99.

Currently, Andhra Bank had branches in AP and Orissa, and wishes to expand network in South and Western India, Vasanthan added.

Vasanthan said the bank had received 1,700 applications under its voluntary retirement scheme. The VRS would result in an outgo of Rs 180 crore, which if gross profit permits would be written off this fiscal, he said adding, the bank was expecting a gross profit of Rs 330 crore in 2000-01.

He said the net non-performing assets as on September 30 2000 stood at 3.23 per cent (Rs 164 crore) as against average NPA level of 7.97 per cent for all public sector banks.

The bank has also sought government’s permission to return capital to the tune of Rs 47.95 crore, he said. The IPO, which would open on February 14, is proposed to be listed on the Mumbai, National and Hyderabad stock exchanges, Vasanthan added.