Uti Bank Equity Issue Via Book-Building

None of the public sector banks which plan to hit the market in the next few months are adopting the book building method. Dena Bank is slated to enter the market in the last week of October, while Bank of Baroda, Bank of India and Canara Bank are in the process of finalising the issue details. UTI Bank plans to enter the market in the last quarter of 1996-97.

The oldest of the new generation private banks, which started operations in April 1994, has moved the Reserve Bank of India with a proposal to offer 18.50 lakh equity shares to the public.

 

This is going to be the first-ever equity issue where the quantum of premium will be determined through the book-building process, a UTI Bank source said. In its letter to the apex bank, UTI Bank has sought the RBI permission to peg the premium in the range of Rs 15.

The entire firm allotment portion will be placed by the book-runners. The quantum of premium will be determined at that stage. The same premium will be charged when the public portion of the issue opens, the UTI Bank executive said. The bank plans to move Sebi on the strength of its audited balance sheet of the first half of 1996-97, provided the RBI permission is through.

Post-issue, the paid up capital of the UTI Bank will jump from Rs 115 crore to Rs 300 crore. We want to offer to the public 20 per cent of the equity, and the rest will be placed with mutual funds, non-resident Indians and overseas corporate bodies by the book-runners, the source said. In other words, of the 18.50 lakh equity shares, 7.5 lakh will be offered to the public and the rest will be placed through the book building process.

According to merchant banking sources, UTI Bank has not yet identified the book-runners. DSP, JM Financials and Kotak Mahindra are in the race for the mandate, sources said.

Market sources are sceptical about whether UTI Bank will be allowed to charge the premium since the Securities & Exchange Board of India (Sebi) has made it mandatory for the new private banks to have a three-year dividend payment record as a necessary pre-condition to charge a premium. However, the bank is hopeful of being allowed to charge the premium as it is in the process of completing the third year of operations.

The LG Group of South Korea, Commonwealth Bank of Australia and German Bank DG had earlier evinced interest in investing in UTI Bank. But the bank could not strike a deal as RBI has not allowed the new private banks to privately place their equity.

Among the existing new banks, HDFC Bank has offered 20 per cent stake to the Nat West group with which it has a strategic alliance while Centurion Bank has Keppel Corporation of Singapore, ADB Manila and IFC Washington as co-promoters. Besides, a sizable chunk of the IndusInd Banks equity is being held by NRIs.

Three new banks Global Trust, HDFC Bank and Bank of Punjab however, entered the market even before commencing operations.