State-owned UCO Bank has proposed to set off its accumulated losses of over Rs 12,537 crore by utilising the balance in the share premium account and has convened an EGM next month to seek shareholders' approval.
A share premium account reflects the difference between the par/face value of shares and the subscription price of the shares. It is an additional paid-in capital, which can also be termed as paid-in capital in excess of par value.
It is a reserve that cannot be distributed, however, can be used for the defined purposes.
The bank will also seek the approval of the shareholders for issuing preference shares to the government for capital infusion in the next EGM.
The extraordinary general meeting (EGM) of the shareholders of UCO Bank will be held on Friday, May 7, 2021, through video conferencing and other audio-visual medium to transact the two businesses, the bank said in a regulatory filing on Friday.
UCO Bank said it will seek the consent of the shareholders to set off its accumulated loss of over Rs 12,537.39 crore as of March 31, 2020, by utilising the balance standing to the credit of share premium account as on date and take the same into account during the current financial year 2021-22.
"The effect of the proposed share premium reduction, if approved and finalised, would be that the accumulated losses, which as on March 31, 2020, stood at Rs 125,373,974,781.74, will accordingly be set off," it added.
The lender said in its view, it is the most practical and economically efficient option available to it in the present scenario to present a true and fair view of the financial position of the bank.
With the setting off, the bank said, it will be able to represent its true financial position which would benefit shareholders as their holding will yield better value and also enable it to explore opportunities to the benefit of the shareholders, including in the form of dividend payment.
"The proposal will also put the bank in a better position to achieve its turnaround plans in a time-bound manner," it added.
For the fiscal ended March 31, 2020, UCO Bank had posted a net loss of Rs 2,436.83 crore.
The Kolkata-headquartered lender will also issue equity shares to the government on a preferential basis for Rs 2,600 crore capital infusion into the bank.
The bank said it will "create, offer, issue and allot 203,76,17,554 equity shares of the face value of Rs 10 each for cash at an issue price of Rs 12.76 per equity share, including premium of Rs 2.76...aggregating to Rs 2,600 crore on preferential basis to Government of India".
Earlier on Wednesday, the board of the bank had approved the issue of equity shares on a preferential basis to the government against the capital infusion of Rs 2,600 crore.
UCO Bank said its current authorised capital is Rs 15,000 crore and the paid-up equity capital is Rs 9,918.34 crore, with the government holding at 94.44 per cent equivalent of stake.
In order to strengthen the tier-I capital of the bank, the government has committed the capital infusion into the bank, it said, adding the capital raised would be utilised for the purpose of shoring up of the common equity and tier-I capital.
As of December 31, 2020, the bank's risk-weighted assets were Rs 1,02,276.44 crore. Total capital was Rs 12,352.54 crore of which tier-I capital stood at Rs 9,211.30 crore and tier-II capital at Rs 3,141.24 crore.
The stock of UCO Bank closed at Rs 11.94 apiece on BSE, up 5.48 per cent from its previous close.