Uti Bank To Sew Up Stake Sale By Month-End

UTI Bank would dilute about a third of its paid-up capital of Rs 131 crore by placing shares with private equity investors by end of September. As a result, the Unit Trust of India's (UTI) stake would drop to around 40 per cent from 60 per cent.

"We are in raising private equity and hope to raise one-third of our paid-up capital by September," chairman P J Nayak told reporters after signing a memorandum of understanding with the department of posts here today.

Refusing to disclose the names of potential partners, he said the premium on the shares is at present being negotiated.

 

"We are talking to multiple investors. We could bring in more than one private equity partner," Nayak said. The bank's scrip is currently trading at about Rs 28.

Cholamandalam Cazenove Securities is advising the bank on pricing of the equity offer, which is expected to be finalised shortly.

Former UTI chairman P S Subramanyam had said in July negotiations had been initiated with Commonwealth Development Corporation, Schroeder and Warburg Pincus to reduce stake to 40 per cent in line with central bank directive.

"We had a choice of overseas listing and private equity model. We chose the latter," Nayak said.

He also said that the bank was planning to raise tier-II capital during the year. At present, UTI Bank has Rs 150 crore as tier II. "Through these measures we would be able to raise the capital adequacy ratio to 11 per cent from 9 per cent," Nayak said.

While maintaining that the bank is not looking at any mergers immediately, the UTI Bank chairman said that the strategy in the short term was to grow organically.

The bank plans to reduce its market exposure much below the stipulated 5 per cent of advances, Nayak said.

He said the bank doubled its balance sheet to Rs 10,500-11,000 crore last year and intends to increase it further by 30-40 per cent. The bank plans to increase its business by over 30 per cent to Rs 18,000 crore this fiscal from Rs 14,000 crore last fiscal, Nayak said.

The bank also plans to reign in costs and reduce non-performing assets to less than 3.0 per cent of advances this fiscal from 3.4 per cent last year.

Although Nayak declined to give profit projections, he said the bank intends to improve margins significantly. UTI Bank's net profit was up 79 per cent to Rs 86 crore last fiscal.