Dhanlaxmi Bank, the 84-year old Indian private sector bank, has been forced to shelve a 2.9 billion rupees ($65.6 million) fundraising issue after a client raised regulatory qualms. 

The bank, which has been building up its presence in private and premium customer services, had sought to issue shares to private equity and corporate customers including two funds run by private equity firm Multiples Alternate Asset Management, Customers Bancorp, MKCP Mauritius Holdings II Ltd and WCP Mauritius Holdings.

However it had to drop the preferential share issue after one of the investors, Customers Bancorp Inc, said it would not be able to participate in the preferential allotment and subscribe to the equity share due to "certain regulatory reasons applicable in the jurisdiction of its incorporation," according to a spokesperson.

Instead, the firm says it will now seek funds through Tier II bonds and could revive its plans when the market improves. 

The spokesman said: "We have our board approval to raise equity capital of up to Rs. 1,000 crore by issue of equity shares. Currently, it will be too premature to comment on the mode or the instrument to raise capital."

At the time the issue was announced in May, Amitabh Chaturvedi, managing director and chief executive officer of the bank said: “The response from long term investors endorses the faith reposed by all stakeholders in the bank’s strategy, robust business model and its commitment to deliver superior shareholder value. The proceeds will be used to support our future expansion plans and will provide us with a firm base for exponential business growth.”