UTI Bank scales down overseas float size

UTI Bank has decided to split its proposed capital raising plan under pressure from government-owned promoters and raise only one-third of the planned $600 million (about Rs 2,500 crore) equity overseas.

The private sector bank will raise the balance of over Rs 1,600 crore through sale of shares to a maximum of 49 institutional investors through qualified institutional placement route, banking sources said.

In addition, the bank would raise another Rs 1,800 crore through preferential allotment to promoters "" SUUTI (Specified Undertaking of Unit Trust of India), Life Insurance Corporation (LIC) and General Insurance Corporation (GIC). The bank has convened an extraordinary general meeting of its shareholders on July 13 to ratify the capital raising plans.

SUUTI is the largest shareholder in UTI Bank with 27.43 per cent stake and LIC owns 10.38 per cent of the bank's equity. The offer of shares on a preferential basis to the promoters will enable them to maintain their holding in the bank.

Shareholders have been putting pressure on the bank management to offer shares to Indian investors. Both SUUTI and LIC would subscribe to the preferential offer.

SUUTI Administrator, S B Mathur, had said late last month that "SUUTI has no problem to arrange for funds. We can offload our investments in liquid funds and invest in the preferential offer. Liabilities of around Rs 14,000 crore to 15,000 crore are due in two tranches. The first tranch in October 2008 and the second tranch in April 2009. We have plenty of time and will have no problem in cash management."