Uti Bank Up On Placement Move

Shares of UTI Bank spurted during the intra-day trading to a high of Rs 39.45 on the Bombay Stock Exchange (BSE) ahead of a board of directors meeting to finalise the private placement of shares with a foreign investor. However, profit booking led the stock to lose marginally and close lower by 0.05 paisa at Rs 36.30 from its previous close.

A total of 75,639 shares of the private sector bank were traded on BSE and 1.60 lakh shares on the National stock Exchange (NSE). In the 19 sessions between July 29 and August 26, UTI Bank advanced 10.15 per cent to Rs 36.35 from Rs 33.

 

The board of directors meet will decide on the issue of a preferential allotment of around 15 per cent of the bank's equity to a foreign investor in 2002.

With the placement of preferential shares, the holding of the promoter Unit Trust of India (UTI), will be reduced to 35.5 per cent from the present 41.7 per cent. The bank's equity capital is expected to rise to Rs 225 crore from the current Rs 191.8 crore.

Earlier, UTI Bank, in order to abide by the rules and regulations of the Reserve Bank of India (RBI) to bring down the promoters' stake to 40 per cent, had made an allotment of equity shares on preferential basis to the Life Insurance Corporation (LIC), General Insurance Corporation (GIC), National Insurance Company and New India Assurance Company on March 28.

UTI Bank has also made an allotment of subordinated bonds (unsecured redeemable non-convertible debentures) on private placement basis aggregating Rs 33.5 crore (including a green shoe option of Rs 20 crore) as the bank's Tier-II capital. The bonds are issued for a period of 63 months and at a coupon rate of 9.30 per cent per annum.

In September 2001, UTI Bank sold 26 per cent stake to two Mauritius-based funds managed by CDC Capital Partners at Rs 34 per share aggregating Rs 158 crore, which diluted the parent's (UTI) holding to 44.88 per cent.

The fall in the scrip over the last few sessions (after the company's results for June quarter 2002 were announced) was mainly due to concerns over the company's capital adequacy ratio (CAR), which has slipped in the last quarter from 10.7 per cent (on March 31) to 9.3 per cent.

But with the company issuing preferential shares, the problem about maintaining CAR has been resolved. Analysts say issuing shares would increase the net base of the company, which would in turn increase its bottomline, but would bring down the earning per share (EPS). However, they feel, the fall in EPS will not have a major impact as long as the bank turns out good growth.

The UTI Bank board, meanwhile, has given a clean chit to the chairman and managing director (CMD) PJ Nayak on the issue of the report of the Joint Parliamentary Committee (JPC), which had earlier asked the bank to conduct an independent inquiry into the failed merger with Global Trust Bank in 2001.

It had charged that UTI Bank's CMD stood to gain personally from the merger. It may be recalled that the proposal for the merger between the UTI Bank and GTB was started on December 15, 2000, and called off on April 4, 2001.

In its draft report, the JPC said the then Unit Trust of India (UTI) chairman P S Subramanyam and the CMD of UTI Bank PJ Nayak are mainly responsible for the lack of transparency in UTI and the UTI Bank's decision-making process, and the failure to conduct a due diligence exercise.

For the first quarter ended June 30, UTI Bank registered a 41.82 per cent rise in net profit to Rs 35.98 crore (Rs 25.37 crore) on a 7.35 per cent rise in total income to Rs 394.29 crore (Rs 367.28 crore).