UTI Bank puts off $600m GDR

Move to give promoters more time to take a call on the issue.

UTI Bank, a mid-sized private sector bank, has deferred its $600 million global depository receipts (GDR) issue as well as the simultaneous preferential offer to its promoters.The bank said the decision to put off capital raising plans was taken in order to provide promoter shareholders - Specified Undertaking of Unit Trust of India (SUUTI), Life Insurance Corporation and General Insurance Corporation - more time to take a call on subscribing to the preferential offer.SUUTI is the largest shareholder in UTI Bank with 27.43 per cent stake. LIC owns 10.38 per cent of the bank’s equity and GIC 2.38 per cent.In a statement released after the bank’s extraordinary general meeting (EGM) here today, UTI Bank said the special resolutions on raising capital have been deferred “to provide promoter shareholders further time for consultation” on the preferential share offer.The shareholders would again meet on July 13 to consider the plans to raise capital. The shareholders, however, passed a resolution increasing the bank’s authorised capital to Rs 500 crore from Rs 300 crore.Banking sources said LIC, which bid in the recently concluded ICICI Bank’s follow-on equity offer for shares worth about Rs 4,000 crore, has asked for more time to arrange for funds as it was currently experiencing a “tight liquidity” situation.SUUTI, which has already obtained the government’s permission, also needs to arrange for funds to subscribe to its portion of the preferential offer.While SUUTI would need to pay about Rs 1,300 crore to subscribe to 20.3 million shares being offered on a preferential basis, LIC requires about Rs 450 crore for 7.6 million shares and GIC around Rs 50 crore for about 0.7 million shares.If the shareholders had passed the resolutions today, the promoter shareholders would have had to subscribe to the preferential offer within 15 days from the commencement of the EGM, in accordance with the Securities and Exchange Board of India (Sebi) guidelines. There is no provision for part payment in a preferential allotment.UTI Bank has already appointed Goldman Sachs and Citigroup as the merchant bankers for the GDR issue. The GDRs are proposed to be listed on the London Stock Exchange.P J Nayak, chairman and managing director of UTI Bank, had earlier said, “We thought making the preferential offer simultaneously with the GDR issue was the fairest way to raise adequate capital and also ensure good corporate governance practice, whereby the existing promoters are given an option to maintain their shareholdings.”

Source: Business Standard BS Reporter Mumbai June 26, 2007