UWB stakeholders may lobby for higher value

Major shareholders of United Western Bank (UWB) are likely to demand a much higher upfront payment by Industrial Development Bank of India (IDBI Bank) for their shareholding under the Reserve Bank of India's (RBI) scheme of amalgamation.

The board of UWB is meeting tomorrow to take a view on the scheme of amalgamation announced yesterday, after the bank was placed under a moratorium on September 2.

The State Industrial Investment Corporation of Maharashtra (Sicom), which owns 10.7 per cent stake in UWB, is expected to seek a substantially higher upfront payment to the shareholders. Sicom has a representative on the board of UWB.

The RBI has proposed an upfront payment of Rs 28 per share to UWB shareholders. "The bank will add value to IDBI Bank to such an extent that even an upfront payment of Rs 35-40 would still be cheaper," a banking analyst said.

The UWB Karmachari Sangh, the employees' union which represents 2,100 non-officer grade staff and also owns a 4.67 per cent stake in the bank, is meeting on September 19 to demand a better "upfront" valuation of the bank.

The Karmachari Sangh represents about 1,000 clerical, 800 sub-staff and 300 sweepers.

But for some mismanagement, UWB is still a good asset to buy and will add a lot of value to IDBI Bank, banking analysts said. IDBI Bank was in dire need of a large branch network to chart out its growth plan.

IDBI Bank has 175 branches against 229 of UWB. Though UWB's branch network is concentrated in Maharashtra, its presence is in the economically thriving regions of Mumbai, Thane and western Maharashtra.

There is a sense of relief among the employees as the amalgamation scheme provides for protection of service conditions.

UWB Karmachari Sangh spokesperson, P Kulkarni said, that the union will try to ensure that UWB employees are transferred within Maharashtra as IDBI Bank is still a growing organisation and still has to expand its retail business.

"UWB is into retail banking and its employees feel they would fit into the scheme of things of IDBI Bank. That's a positive thing," Kulkarni said.

A UWB union leader said the bank's existing voluntary retirement scheme is likely to be made operational for about a month from the date the amalgamation is made effective to provide employees not wanting to be part of IDBI Bank to exit.

The UWB employees are likely to benefit in the long term. The Satara-based bank has been following the pay scales negotiated by the banking industry with the Indian Banks' Association. IDBI Bank has been following the RBI's pay scales, which are higher than the public sector banking industry scales.

The spokesperson of United Western Bank Officers Organisation, which also holds 2.62 per cent stake in UWB, said the union had held the stake to retain a separate identity of the bank and its office bearers are still to decide whether to demand a higher pricing for its stake.