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Deeptha Rajkumar

RUMOURS of a stake sale by parent UTI has introduced an element of buoyancy in the UTI Bank counter in the recent past.

Brokers said that the bank's shares on the bourses have been firming up ever since it became known that UTI-1 has sought Government approval to offload the equity to a strategic investor.

``If UTI were to offload its equity in the bank, it would mean change in management which in turn could trigger an open offer, thereby enhancing shareholder value,'' a broker said.

The sale is also expected to improve the bank's capital adequacy ratio, which currently stands at 10.9 per cent as against the stipulated 9 per cent by the RBI.

Reportedly Citigroup, ABN Amro and Standard Chartered have evinced an interest in the bank.

However, the market is abuzz with talk of a new player — the Tatas.

``The Tatas currently hold around 10 per cent equity in the bank. And there is talk that they are looking to enhance their presence in the sector. This has been fuelling interest in the stock,'' Mr Rajiv Thakkar, head of research, Parag Parikh Securities said.

However, market perception has it that at its current levels, the stock is expensively valued.

"At these levels the stock is quoting at almost two times its book. Hence, the upside is capped,'' a broker said.

According to Mr Thakkar, further momentum at the counter hinges on the stake sale.

The bank's recent financial performance is also said to have infused confidence in the counter.

However, there is concern over the slow growth in advances, which is indicative of the fact that competition may be weighing heavily on the bank.

It also continues to lag behind its peers on the NPA front.

The stock ended the day at Rs 78.70, up 7.6 per cent on the BSE with around 5.78 lakh shares traded. On the NSE, the stock closed at Rs 78.50, up around 6.47 per cent with around 19.5 lakh shares traded.

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