• FEBRUARY 9, 2000

Bank of Rajasthan reports better results

Bank of Rajasthan (BOR) has reported a net profit of Rs 25.6 m for the 3QFY2000. This is up compared to the loss of Rs 492.6 m reported in the 3QFY99. Its interest income went upto Rs 959 m for the 3QFY2000 a growth of 14% from Rs 838 m reported in 3QFY99 and its income from fee based activities fell by 15% to Rs 109 m in the 3QFY2000 from Rs 128 m in the 3QFY99.

(Rs m) 3QFY2000 3QFY1999 Change
Interest income 959.0 838.0 14.4%
Other income 109.0 128.0 -14.8%
Operating expenses 284.5 250.5 13.6%
Interest expenses 756.4 700.0 8.1%
Provisions & Contingencies 17.2 507.4 -96.6%
Net profit 25.6 (492.6)  
Net profit margin (%) 2.4%    

BOR's interest expenses rose by only 8% to Rs 756 m in 3QFY2000 while its operating expenses grew by 14% to Rs 284.5 m in the same period. BOR's cost of funds has come down to below 9% in the current year from 12% a year ago. However the main driver to its net profit growth was fall in its provisions and contingencies (including provisions for depreciation, non-performing assets and tax) in the 3QFY2000. These fell to Rs 17.2 m in the 3QFY2000 from Rs 507.4 m in 3QFY99. The main reason for this decline is the bank's efforts in recovering non-performing assets (NPAs). Of its Rs 500 m NPAs recovery target for the 3Q it has managed to recover Rs 380, that is 76% of its target. Its net NPAs currently stand at 9.5% (Rs3,500 m).

BOR plans to fully computerise its branches over the next two years and offer a range of products like internet banking, credit cards and depository services.

In a related news item, the Tayals who own a 14.5% stake in BOR are planning an open offer to consolidate their position. The Tayals have assumed management control in the bank and are planning on increasing their stake further. The Tayals have five nominees in the nine member board currently. It is not clear whether Tayals will announce a public offer for a minimum of 20% and then slowly take it upto 40%, or whether they would directly take it upto 40%. Mr. Pravin Kumar Tayal was authorised as the bank's part time chairman by the Reserve Bank of India last October.

BOR's rights issue of Rs 672.8 m was opened towards the end of ... and each of the rights share carries a warrant with a conversion clause that the instrument has to be converted into shares at 25% below the market price. The management hopes that with the better performance of the bank these warrants will be able to get a better price (currently at Rs25/26). Also these funds would help BOR in raising its capital adequacy ratio to 9%, which currently stands at 6.7%.

BOR was earlier managed by the Bangur family, but however due to bad management and performance they were removed by the Reserve Bank of India (RBI). The Tayal family was then brought into manage the bank by the RBI. BOR though a private sector bank its performance in the past has been worse than many public sector banks operating in India. However with competition picking up in the banking sector, it has no choice but to put its act together to try to improve its performance and gain market share.

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