New Delhi: State-owned UCO Bank has proposed using the balance in the share premium account to offset its cumulative losses of over Rs 12,537 crore and has scheduled an EGM for next month to seek shareholder approval.
A share premium account represents the difference between a share’s par/face value and its subscription price. It is extra paid-in capital, also known as paid-in capital over par value. It’s a reserve that can’t be spent. It may, however, be used for the specified purposes.
In addition, at the next EGM, the bank will seek shareholder approval to issue preference shares to the government for capital infusion. The UCO Bank shareholders will hold an extraordinary general meeting (EGM) on Friday, May 7, 2021, via video conferencing and other audio-visual mediums to transact the two businesses, the bank said in a regulatory filing Friday.
UCO Bank stated that it would seek shareholder approval to set off its cumulative loss of over Rs 12,537.39 crore as of March 31, 2020, by using the balance standing to the credit of the share premium account as of that date, and would account for the same during the current fiscal year 2021-22. “The impact of the proposed share premium reduction, if accepted and finalized, would be that the cumulative losses, which stood at Rs 125,373,974,781.74 as of March 31, 2020, will be set off,” it added.
According to the lender, it is the most realistic and cost-effective solution available to it in the current scenario for presenting an accurate and equitable picture of the bank’s financial position. The bank stated that by launching, it would reflect its proper economic role, which will benefit shareholders by increasing the value of their holdings and allowing it to seek opportunities for the benefit of shareholders, including dividend payments.
The bank stated that it would “make, bid, issue, and allot 203,76,17,554 equity shares of Rs 10 each for cash at an issue price of Rs 12.76 per equity share, including a premium of Rs 2.76…amounting to Rs 2,600 crore on a preferred basis to the Government of India.” Earlier on Wednesday, the bank board approved the issue of preferential equity shares to the government in exchange for a capital infusion of Rs 2,600 crore.