2 Months Left For Pvt Bank Promoters To Prune Pie

The Reserve Bank of India (RBI) has decided against relaxing the timeframe for bringing down the promoters' stake in new private banks. The central bank has told the promoters to bring down their stake to 40 per cent before the end of the current fiscal.

This will force UTI Bank, IndusInd Bank and IDBI Bank to place equity with strategic partners over the next two months as none of the banks are willing to hit the market to dilute promoters' stake.

Among the new private banks, Unit Trust of India's stake in UTI Bank is currently at 44.88 per cent. This needs to be brought down to 40 per cent going by the RBI's new bank licensing norms.

IDBI's stake in IDBI Bank is currently around 57 per cent, while the promoters of IndusInd Bank have 56.25 per cent in the bank.

UTI Bank had in September 2001 made a preferential issue at Rs 34 per share to CDC Capital Partners, formerly Commonwealth Development Corporation.

CDC had picked up 26 per cent at Rs 157.59 crore through two funds -- South Asia Regional Fund and CDC Financial Services.

The bank has allotted 1.78 crore shares (9.99 per cent) to South Asia Regional Fund and 2.89 shares (16.02 per cent) to CDC Financial Services (Mauritius).

Post preferential issue, UTI's stake in the bank came down from 60.65 per cent to 44.88 per cent, while the collective stakes of Life Insurance Corporation, General Insurance Corporation and its erstwhile subsidiaries came down to 9.31 per cent stake from 12.59 per cent.

According to sources, the bank is currently in talks with LIC and other players to bring down UTI's stake in the bank. LIC's stake in the bank has fallen from around 5.97 per cent to around 4.5 per cent now. UTI wants to bring down its stake in the bank to 26 per cent. This is likely to happen in the next financial year.

IDBI's stake in IDBI Bank is currently pegged at around 57 per cent and Sidbi holds another 14 per cent stake. IDBI Bank had given a mandate to DSP Merrill Lynch to explore the possibility of placing part of its equity with overseas investors.

Bank of Muscat has evinced interest in picking up 26 per cent stake in the bank for Rs 34 a share. However, the talks failed as IDBI was not willing to commit against merging the bank with itself. The IDBI board is expected to finalise its decision of offering 26 per cent stake in the bank to a strategic partner tomorrow (January 29).

IndusInd Bank will also have to bring down the stake in the bank from 56.25 per cent to 40 per cent. The stake of the residential promoters through IndusInd Enterprise Finance Ltd is pegged at 31.25 per cent, while the NRI promoters holding is at 25 per cent.