UTI Bank was prodded higher on Tuesday on reports that foreign funds are approaching the parent, UTI, for its 33.56% stake in the bank.
The reports worked towards lifting the scrip of the private bank by 3.12% to Rs 42.90 by 9:59 IST. A total of 3,300 UTI Bank shares were traded on BSE by then. The scrip has done relatively well over recent sessions. Between 31 March and 7 April 2003, the scrip rose 6.66% to Rs 41.60 from Rs 39.
According to a report in the media today, foreign funds have started approaching Unit Trust of India in order to acquire the latter's 33.56% stake in UTI Bank. Any investor who takes this stake will have a majority control in the bank. Other investors in the bank could also tag along with UTI to sell their equity holding in the bank, the report suggests.
Analysts say that if the stake is offloaded to an investment banker, a change in management may not be effected. But, if sold to a foreign bank, investors expect a more professional management will come in (working to the benefit of the bank). Also, with the stake's changing hands, an open offer will be triggered.
Another advantage from the probable sale of stake is that the low capital adequacy ratio of UTI Bank will improve. It will help the bank to release more funds to retail customers. The bank's CAR stands at 9.8% as against the stipulated 9% by Reserve Bank of India.
Late last month, a committee of directors of UTI Bank allotted 3,83,62,834 equity shares of Rs 10 each at a price of Rs 42.75 per share (including premium of Rs 32.75 per share) on preferential allotment basis to Life Insurance Corporation of India (1,84,00,000 shares), Citicorp Banking Corporation, Bahrain, (88,30,540 shares), Chryscapital LLC, Mauritius, (88,30,540 shares) and Karur Vysya Bank (23,01,754 shares). UTI Bank's board raised about Rs 164 crore (Rs 1.64 billion) through this preferential allotment .
The board also decided to increase the authorised share capital of the bank from Rs 230 crore (Rs 2.3 billion) to Rs 300 crore (Rs 3 billion) and alter the capital clause of the Memorandum and Articles of Association, accordingly.
With the enhanced capital structure, parent Unit Trust of India's holding got lowered to 33.6% from 40.3%. CDC's holding moved up to 20.1% (24.2%) and the holding of GIC and other PSU insurers rose to 7.6% (9.2%).
In September 2001, UTI Bank sold 26% equity stake to two Mauritius-based funds managed by CDC Capital Partners at Rs 34 per share, aggregating Rs 158 crore (Rs 1.58 billion).
UTI Bank continues to focus on its three main drivers of growth i.e. net interest income, thrust on retail banking and fee-based income.
For the third quarter ended 31 December 2003, UTI Bank reported a 44% rise in net profit to Rs 51.50 crore on an 80% increase in net interest income to Rs 91.50 crore.
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