UTI, LIC, GIC not to respond

The major stakeholders in UTI Bank""Unit Trust of India, the Life Insurance Corporation of India (LIC) and General Insurance Corporation (GIC)""are unlikely to respond to the open offer made by HSBC Asia Pacific Holdings.

UTI holds a 33.46 per cent stake in the bank, LIC holds a 13.50 per cent stake and GIC a 7.39 per cent stake.

According to sources, none of the three original promoters is likely to take part in the open offer.

The scrip today closed on the Bombay Stock Exchange at Rs 114.10, a price rise of 19.98 per cent. This is a premium of 26.77 per cent on the open offer price of Rs 90.

UTI reportedly discussed the issue with the bank yesterday and made it clear that it would not take part in the open offer.

A GIC source told Business Standard that the question of taking part in the offer did not arise as the offer price was too low.

The other major stakeholders in the bank are Citicorp Banking Corporation with a 3.83 per cent stake, Chryscapital (3.83 per cent), Templeton Mutual Fund (1.13 per cent) and Karur Vysya Bank (1 per cent).

HSBC is not very enthusiastic about taking over equity beyond 20 per cent. It has made the offer to conform to the regulatory requirement.

Securities and Exchange Board of India norms require an entity to make an open offer for a 20 per cent stake once it acquires more than a 15 per cent stake in a company.

RBI rules allow a bank to hold up to a 30 per cent stake in another bank as investment. HSBC has said its investment in the bank is only a financial investment.

Incidentally, LIC at one point of time was keen on acquiring UTI's 33 per cent holding in UTI Bank.

The state life insurer recently increased its shareholding in the bank from around 4 per cent to a little over 13 per cent.

LIC, however, needs the clearance of the Insurance Regulatory and Development Authority to hold more than 20 per cent in the bank.

According to the IRDA Act, an insurance company cannot have more than a 20 per cent shareholding in any one entity without the regulator's "special" approval.

LIC had in the past taken special approval from the IRDA when it hiked its stake in Corporation Bank to 27.02 per cent.