UTI Bank's ADS may receive approval

UTI-I may approve proposed issue.

The Specified Undertaking of the Unit Trust of India (UTI-I), the principal promoter of UTI Bank, is expected to approve the bank's proposed issue of American Depository Shares (ADS) even though it will lead to a dilution of its own stake in the bank.

The bank management has been planning to raise $ 200 million through an ADS issue to shore up its capital base.

S B Mathur, administrator of UTI, I told Business Standard that the capital raising issue has not been considered yet but it will be discussed in the next board meeting. "Post issue, UTI-I's stake in UTI Bank is expected to come down. We are aware of it," he added.

According to banking sources, six months back when the bank management had expressed its intent to raise capital through a overseas listing, the promoter was not in favour, since it would lead to a dilution of its stake in UTI Bank. UTI-I holds about a 33 per cent stake in the bank. The LIC, GIC and UTI-I together hold about 53 per cent in the bank.

PJ Nayak, chairman and managing director UTI Bank, had earlier told Business Standard that he would meet the new UTI administrator to discuss the issue of raising capital.

"Personally, I am in favour of 20 per cent dilution in shareholding. The bank currently has 23.2 crore shares and will issue 4.6 crore fresh shares in the market whenever the bank raises fresh capital," he said adding that he was in favour of raising capital through a one time issue.

The bank has been growing by over 35 per cent year on year. Its capital adequacy ratio was over 10 per cent in September 2004 but is expected to come down to about 9 per cent at the end of the December quarter, to account for the bank's asset growth.

Nayak had said that the bank would have to raise capital in the final quarter of the current fiscal or else it would require to downsize the asset base. A $200 million ADS issue will support the bank's growth plans for the next three years, said senior UTI Bank officials.