Mumbai: Tata Sons and the US-based Chrysalis Capital have emerged as the frontrunners to pick up a 10-per cent stake in UTI Bank. The bank is likely to finalise a preferential issue either in favour of Tata Sons or Chrysalis by end-February 2003.
Tata Sons, the holding company of the Tata group, has already completed the due diligence of the bank. The bank is in discussions with the Tatas to fine-tune the modalities of the investment, sources close to the development say.
UTI Bank had appointed Salomon Smith Barney (SSB) as its investment banker to raise additional equity through the preferential issue. SSB had received expressions of interest from six suitors, including Tata Sons, Chrysalis Capital, JP Morgan and Development Bank of Singapore.
Currently, Unit Trust of India (UTI) owns a 41.74-per cent stake in the bank. This stake is being held through the development reserve fund of UTI-I, which will manage all assured-return schemes of the mutual fund. The equity dilution will bring down the UTI stake to around 35 per cent.
The bank, in September 2001, had made a preferential issue to CDC at Rs 34 a share. However, according to the agreement, UTI Bank had to bring in a strategic investor acceptable to them by the first quarter of the current fiscal.
Otherwise, CDC would have the right to recommend one or more investors to the bank. Though there was initially some resistance from CDC to bring in a new strategic investor, now it seems the issue has died down.
According to analysts, increased private stakes are purported to be good for UTI Bank. The low capital adequacy ratio of the bank could improve with the placement of shares. It will help UTI Bank release more funds to retail customers.
UTI Bank's capital adequacy ratio as on 30 September 2002 stood at 9.7 per cent as against the stipulated 9 per cent by the Reserve Bank of India.