Uti Bank Set To Park 26% With Cdc

The board of UTI Bank will meet tomorrow to decide on preferential issue of shares to Commonwealth Development Corporation (CDC). The bank has been in talks with foreign investors for sometime now for placing a part of its equity.

According to sources, the bank will privately place around 26 per cent of the capital with CDC through a preferential issue. The bank is looking at increasing its equity capital by one third after the preference issue from Rs 131.90 crore to around Rs 175 crore.

Sources said the stake sale could be at around Rs 35 per share. The placement could fetch the bank around Rs 160 crore. The scrip closed today at Rs 23.55 in the Bombay Stock Exchange.

UTI's stake in the bank is now at 60.65 per cent followed by Life Insurance Corporation stake at 5.97 per cent and General Insurance Corporation's stake at 5.69 per cent. With the stake sale, UTI's stake in the bank is likely to go down to around 44 per cent. UTI will have to further dilute its stake by 4 per cent to reach the RBI-prescribed promoter holding level of 40 per cent.

Market observers said that CDC will at a later date offload its stake to a multinational bank which could be a strategic investor. However this process could take over a year.

The front runners to the preferential issue were the Commonwealth Development Corporation (CDC), the Dutch-Belgian group Fortis along with a clutch of three to four other investors.

The CAR of the bank has fallen below 8 per cent against the regulatory stipulation of 9 per cent. The issue will take care of two of the immediate issues the bank is facing -- increase the capital adequacy ratio of the bank and bring down the UTI's stake in the bank to around 40 per cent.

In recent years the bank has been on an aggressive growth mode specially in the retail sector. It is going ahead with an aggressive ATM strategy across the country.