"The fund would be raised by issuing 4 crore shares through preferential allotment and the capital raised would be utilised for business growth," a senior Canara Bank official said.
At the current market price, Canara Bank would be able to raise about Rs 1,500 crore by issuing shares on preferential basis.
The bank has fixed March 31 as the relevant date for purpose of determination of pricing of shares at which shares would be issued to the insurer, the official said.
As of December 2014, LIC held 6.4 per cent stake, or 2.95 crore shares, in the bank.
The bank already has got in-principle approval from LIC for subscription of up to 4 crore shares.
As per the approval letter from LIC, the official said, total exposure cannot exceed 15 per cent of post issue capital of the bank at any point of time.
The board of Canara Bank has already given approval for issuance of preference shares. The bank would seek shareholders' nod for the same on April 30.
After approval from the Extraordinary General Meeting, preferential issue in favour of LIC would be done, the official added.
For the third quarter ended December 2014, Canara Bank reported 60.2 per cent increase in net profit at Rs 655.92 crore despite increase in bad loans.
The Bangalore-based lender had posted a net profit of Rs 409.35 crore for the October-December quarter of 2013-14 fiscal.
The bank's total income increased to Rs 12,227.86 crore for the quarter under review from Rs 10,935.29 crore in the year-ago period.
As far as asset quality of the bank is concerned, gross NPAs as a percentage of total advances rose to 3.35 per cent from 2.79 per cent in the same quarter a year ago.
Its net NPAs went up to 2.42 per cent from 2.39 per cent at the end of December 2013.
Gross NPAs in absolute terms rose to Rs 10,573.57 crore as compared to Rs 8,073.92 crore at the end of December 2013.
Source : Economic Times