UTI Bank to raise $1 bn via medium-term notes

UTI Bank plans to raise up to $1 billion through medium-term notes to fund its global operations from Singapore.

"We have not put an exact number, but preliminary suggestions emanating from those who looked at the (proposed) Singapore operations say the requirement could be up to $1 billion," said P J Nayak, chairman and managing director.

The notes could be raised in tranches over two years. The bank, however, can raise these notes only once the Singapore branch becomes operational, said Nayak. The bank plans to open the proposed offshore unit in Singapore next month and is in the process of getting ratings from Standard & Poor's and Moody's.

Nayak said there was a need to focus on international operations owing to rising remittances from Indians overseas and surging intra-Asian trade. He said the bank would not adopt inorganic route to expand its overseas operations.

Nayak was speaking to reporters after announcing a tie-up with UTI Mutual Fund to enable the bank's customers to buy units of UTI Mutual Fund schemes and issue necessary payment instructions online through the ATM.

Nayak ruled out an equity issue in the near future to fund expansion, even though UTI's capital adequacy fell more than it expected since it raised $257 million through a global depository receipts (GDR) issue in February 2004. Its capital adequacy is currently at 11.8 per cent.

"When we raised equity last time, we said that we would not like to have equity dilution for three years. But it's going to be a challenge since we have grown a bit faster than we expected," Nayak said.

As a part of its overseas operations, UTI Bank is also planning to set up offices in Dubai, Singapore and Sri Lanka. The bank will set up a representative office in Dubai and a branch in Sri Lanka subject to regulatory approvals.

It has decided to open a branch in Sri Lanka to cater to the growing retail and trade finance demand in the country as consumer demand and buying pattern in Sri Lanka is very similar to that in India.

The bank is also looking at China as a potential business destination on account of the growing trade flows.