The Development Bank of Singapore (DBS) and JP Morgan are looking at a stake in UTI Bank through its proposed preferential issue of 15 per cent expected before the end of calendar 2002.
JP Morgan and DBS join Chrysalis Capital which has already conducted a due diligence. UTI Bank has appointed Salomon Smith Barney as its investment banker to raise additional equity through the preferential issue. According to sources, the bank is looking at making a preferential issue to more than one fund at above Rs 60 a share.
The bank's attempt to place a 5 per cent stake with AIG India Infrastructure Sectoral Fund, a private equity fund managed by AIG and IL&FS, at Rs 60 per share could not go through earlier this year.
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According to sources, JP Morgan is looking at investing in at least one of the new private sector banks.
It is also in talks with IDBI to pick up a stake in IDBI Bank after three other foreign investors, Chrysalis Capital, Ankar and New Bridge Capital, walked out as IDBI was not keen on some of the riders put up by them. In case of JP Morgan too, IDBI has asked the former to rework on some of the riders put by the former including the put and tag-along options.
Under the put option, IDBI will have to buy back shares after 36 months even if there is no merger with the institution. IDBI is only agreeable to buying back JP Morgan's stake at 15 per cent return on its investment if it merges the bank with itself.
On the tag-along option, IDBI has said that it will try to sell JP Morgan's stake too in case the institution sells off a chunk of its stake to someone else but this should not be put in as a right in the shareholders' agreement.
In case the preferential allotment with JP Morgan does not work out, the Small Industries Development Bank of India (Sidbi) is ready to take up a stake in the bank for which it already has passed a board resolution to pick around 12 per cent stake for around Rs 28 a share.
IDBI's stake in the bank is pegged around 57.14 per cent and another 14 per cent is held by Sidbi. In case Sidbi comes in it has also asked for one more director on the board of the bank.
A decision on the preferential allotment is likely to be taken by IDBI shortly. The bank board was interested in bringing in a foreign equity partner and was resisting IDBI's move to allow SIDBI to increase its stake in the bank.