Union Bank share offer likely in 2 tranches

Union Bank of India will tap the capital market through a public offer of eight crore shares, which could fetch it about Rs 800 crore to meet Basel- II norms and other business requirements.

This will be apart from the plan to raise Rs 700 crore Tier-II capital this year to keep pace with asset growth as the Mumbai-based bank is targeting a business of Rs 1,22,000 crore this fiscal.

"We may go for public issue of eight crore shares - not in one go, may be in two tranches," chairman K Cherian Varghese said.

The public offer, which could hit the market this fiscal, will bring down government stake in the bank to 51% from 60.85%.

At the current price of Rs 106 per share, the bank can easily raise up to Rs 800 crore by offering eight crore shares.

The bank is raising capital from the market as its capital adequacy ratio is likely to come down to 10.75-11.25% from 12% after implementation of the stringent Basel-II norms in 2007 that prescribes higher provisioning for
operational risk.

The bank has set a business (deposits + advances) target of Rs 1,22,000 crore in 2005-06 as against Rs 1,00,000 crore in the previous fiscal.

"We expect deposits to grow 16.5% to Rs 72,000 crore and advances by 21% to Rs 49,500 crore in the current fiscal," Varghese said.