Post IPO, UBI to set up housing finance unit

State-owned United Bank of India (UBI) is planning to set up a housing finance subsidiary, after its initial public offering (IPO) hits the market by December-end or January next year.

The government holding in the bank, which at present is 100 per cent, would come down by 15.86 per cent post-IPO, said T M Bhasin, executive director, UBI.

“We have plans to start a housing finance subsidiary by the next financial year, as we already have a good exposure to the housing sector, and it has a good growth potential. We will finalise the plans after the IPO,” he said.

The bank’s board has already approved the issuance of 50 million shares of Rs 10 each at a premium. After the issuance, the bank’s paid-up capital will be about Rs 316 crore. The capital restructuring reduced the bank’s paid-up capital to Rs 266 crore from Rs 1,532 crore earlier.

Recently, the government had contributed Rs 250 crore to the bank as Tier-I capital, by subscribing to perpetual non-cumulative preference shares (PNCPS) at repo plus 100 basis points.

The bank expects to get an additional Rs 550 crore as Tier-I capital by December 2009. The capital adequacy ratio (CAR) of the bank will stand close to 13 per cent after the capital infusion.

UBI will invite bids for appointing merchant bankers for the IPO after it gets the Cabinet approval for it.

Recently, Central Bank of India had also indicated that it was planning to restructure its home finance by increasing stake in it.

“There has been a resurgence in the home finance market but it has still not been tapped. By restructuring this subsidiary, we will like to tap the opportunity” S Sridhar, Chairman and Managing Director of the Central Bank of India had said.