Sicom Hikes Stake In United Western Bank

Sicom has increased its stake in the United Western Bank (UWB) from less than 5 per cent to 9.9 per cent. Sicom, which is into term lending, feels it can synergise its operations through hiking its stake in UWB which is into short-term lending.

In a negotiated off-market deal, Sicom has bought the shares at a price of Rs 40 each. This is the price at which UWB had recently come out with a rights issue.

Since Sicom was picking up a sizeable chunk, around five per cent, it had to pay a premium of Rs 10 over the prevailing market price of Rs 30.

 

The institutions decision to increase stake in UWB is part of a long-term strategy.

While UWB will be providing working capital assistance, Sicom will provide term loans to companies, said P N Joshi, chairman, UWB.

In the changing environment, it was important to tie up with a term lending institution and provide a wide gamut of financial services including letters of credit and bank guarantees under the same roof, he said.

UWB which is one of the older generation private banks has a strong presence in Maharashtra with majority of its branches being situated in the state.

The decision by UWB and Sicom to work closely is in tune with the developments in the financial sector.

Recently, the Industrial Development Bank of India (IDBI) had decided to work closely with its subsidiary IDBI Bank.

Joshi said no formal agreement had been signed between the firms. Instead, there is an informal understanding between the institutions.

According to Joshi, Sicom is yet to lodge the shares with UWB for transfer. Once the shares are transferred, it will become the single largest share holder in UWB.

The Unit Trust of India, Life Insurance Corporation and Industrial Development Bank of India collectively hold less than 5 per cent of UWBs paid up capital of Rs 30 crore.

Sicom is not likely to increase its stake from the current 9.9 per cent as it will attract the takeover code. If Sicoms stake goes above 10 per cent it will have to make an open offer to the general public to pick up their stake.