Uti Bank Placement With Foreign Ally Only By Q1

UTI Bank is looking at placing a part of its equity with a foreign partner only by the first quarter of the next financial year. This is because the bank is expected to need additional capital only by then.

UTI Bank's capital adequacy ratio -- which is pegged at around 11 per cent at present -- is likely to come down following asset growth during the current fiscal triggering the need for the placement, a highly placed UTI Bank source said.

The bank is in talks with some foreign peers and also with Fortis, the Dutch-Belgian financial group, for bringing in a strategic partner.

Among foreign entities, UTI Bank is said to be in talks with French and Swiss majors.

Sources also said the bank could go for a preferential issue in order to increase its capital base.

UTI Bank had some time earlier placed 26 per cent stake with two funds of CDC Capital Partners (formerly known as Commonwealth Development Corporation) -- the South Asia Regional Fund and CDC Financial Services, for Rs 157.59 crore.

Post this preferential issue, the paid-up capital in the bank has risen from Rs 131.90 crore to Rs 178.25 crore.

"The bank is growing at a rapid pace and would need fresh capital by the first quarter of next year. We are in talks with different players and no time limit can be given for the fructification of the talks. The talks with CDC had taken around six months to fructify," said sources.

The bank had earlier this month appointed the Boston Consulting Group (BCG) for realigning its strategies in corporate and retail banking.

BCG will be working with the bank for the next six months. UTI Bank has already taken shareholders approval for increasing the limit of foreign institutional investors, non-resident Indians and overseas corporate bodies to 49 per cent.

Parent Unit Trust of India's stake in the bank is currently at around 44.88 per cent, while LIC, GIC and GIC subsidiaries together hold 9.31 per cent.

UTI will have to bring down its stake to below 40 per cent according to Reserve Bank of India norms.

"No decision has been taken on what per cent of the stake will be sold to the potential investor. Discussions are in the preliminary stage," said sources.