UTI Bank in limelight

UTI Bank advanced further on good buying support ahead of the bank's board meet on Monday to consider preferential issue of equity shares.

The stock of the private sector bank was up by 3.60% at Rs 44.60 on the BSE. A total of 16,576 shares changed hands on the counter by 11:30 IST.

The rally on the UTI Bank counter was mainly due to reports that the bank's board will meet later today to discuss the preferential issue of equity shares. The bank is likely to place 15-20% of its equity with GIC, LIC, and state-run banks. The rise was also due to the sops given to the banking sector in the Union Budget for 2003-04 - the raising of the foreign direct investment limit in private sector banks to 74% from the current 49%.

Earlier, there were reports that foreign banks were eyeing a stake in UTI Bank. The bank's investment banker Salomon Smith Barney had received at least six expressions of interest including those from AIG, ING Barings Private Equity, DBS Singapore and Chrysalis for the 20% stake that UTI Bank proposed to put on the block. However, so far, no decision has been taken in this connection.

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).

Meanwhile, the low capital adequacy ratio of UTI Bank could improve with the private placement of equity. It will help the bank to release more funds to retail customers. Its CAR stands at 9.8% as against the stipulated 9% by Reserve Bank of India. The fresh infusion of funds could increase the CAR, which could help the bank to bring down Unit Trust of India's (the promoter) stake to 33-34% from the current 41.7%.

Earlier, on 21 December 2002, UTI Bank's board of directors allotted unsecured redeemable non-convertible debentures on private placement basis aggregating Rs 93.1 crore (including green-shoe option of Rs 43.1 crore) for its Tier-II capital. The debentures were issued for a period of 69/93/117 months at coupon rates of 8.40%/8.70% and 8.95% per annum respectively.

In September 2002, the board allotted unsecured redeemable non-convertible debentures on private placement basis, aggregating Rs 100 crore (including green-shoe option of Rs 50 crore), to meet the bank's Tier-II capital requirements. The NCDs were issued for a period of 69, 93 and 117 months at coupon rates of 8.80%, 9.05% and 9.30% per annum, respectively.

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 (Rs 35.76 crore) on 80% increase in net interest income to Rs 91.50 crore (Rs 50.86 crore).