United Bank gets green signal for public issue

United Bank of India (UBI) will hit the market with its initial public offer by end-January or early February. The Kolkata-based bank received the go-ahead for the issue from the government on Friday afternoon.

Satish C Gupta, chairman and managing director, UBI, said, “The long pending government approval has just come through, the RBI approval had come earlier. We will move with lightning speed and would be deciding on the appointment of issue managers in a week’s time.”

UBI is among the two public sector banks, which are yet to hit the market; Punjab and Sind Bank is the other.

Post-IPO, government shareholding in UBI would come down to 84% from 100%.
At the end of September, the bank had a net worth of Rs2,763 crore, up from Rs2,609 crore in March 2009.

The government has already restructured and reduced the equity capital from Rs1,532 crore to Rs266 crore by allowing Rs1,266 crore into the capital reserve account. A further Rs50 crore will be added to the equity, taking the total to Rs316 crore, Gupta said.

“Moreover, the government has approved Rs800 crore of perpetual non-convertible preference shares to be inducted into the bank. We have received the first tranche of Rs250 crore in March this year and the next tranche of Rs550 crore will be inducted by March 2010,” Gupta said.

Given the equity base of Rs316 crore, the equity dilution of 16% would mean around 5 crore shares will be up for sale.

Gupta said the bank had arrived at a tentative price of Rs72.71 per share, at a price-to-book value ratio of around 0.7. At that price, the issue can raise around Rs365 crore. Gupta, however, added that “The IPO will come at a premium and the right price has to be decided. As per audited accounts, the book value of the share has gone up to Rs104 as of September 2009 from Rs 98 in March 2009. Once the capital restructuring of the bank is complete by this fiscal, the book value of the bank is likely to shoot up to Rs125.”

The bank, which has a stronger regional identity, will eventually become more national in its visibility and outlook, the chairman said. “We will go through a business process reengineering, which could also include a review of the logo among other things. But all of this requires a consensus,” he added.

UBI plans to add 128 branches to its current network of 1,471 branches by March, 2010. Around 34 branches are to be added by the month-end.

The bank, which is targeting a total business of Rs 2 lakh crore by 2012, is expected to have a business of Rs1.2 lakh crore by the end of this fiscal.

Among other things, it plans to open a rep office in Bangladesh over the next couple of months, which would be upgraded to a branch office in the next two years. It may also open an office in Myanmar.