The Hindu Business Line : SocGen may buy stake in Bank of Rajasthan

A top source at the local bank said that Societe Generale (SocGen) had informally indicated that it was keen on picking up the equity stake, provided it eventually got to own at least 26 per cent. The bank might, however, begin with buying a little under 15 per cent, a threshold that triggers the Securities and Exchange Board of India's takeover code.

A SocGen spokesperson e-mailed Business Line from Paris that the bank would not comment on the matter. But a source said that the French bank wanted to expand its two-branch operation in India by buying a local bank and merging its own offices with it.

Bank of Rajasthan's (BoR) board has cleared privately selling a 14.75 per cent equity stake to one or more strategic partners and mandated investment bank Edelweiss to find them. Currently, its Chairman, Mr P.K. Tayal, and his associates control about 46 per cent of the equity capital. Their stake will fall to about 38 per cent after the private sale of shares.

Others, such as foreign institutional investor Mattlehorn and private equity firm Actis, are also said to be keen on equity ownership in the bank. The source said the bank wants the investors to shell out at least one and half times the market price of its share.

The stock market appears to have got a whiff of the impending deal. The BoR stock was up nearly 17 per cent at about Rs 57 with a combined trading volume of over two crore shares on the BSE and NSE.

SocGen's asset management arm had last week joined State Bank of India's mutual fund as an equity partner. However, the foreign bank will need Reserve Bank of India's approval to buy 26 per cent equity in a bank.

The sources said earlier that the RBI was insisting that BoR spread out the private placement among at least three investors. However, with the Government hinting that it favours more freedom for foreigners to invest in Indian banks, the RBI may come around to allowing a single investor buying the entire 14.75 per cent on offer. It may even allow a strong foreign bank to pick up 26 per cent, they hoped.

Even though current guidelines allow direct foreign investment up to 49 per cent in Indian private banks, the RBI has proposed to restrict it to 10 per cent. The central bank would clear any further investment on a case-to-case basis.

Except for Dutch group ING holding about 45 per cent equity in ING Vysya Bank and the UK-based HSBC's 14.5 per cent holding in UTI Bank, no other foreign bank currently has any stake in Indian banks.

More Stories on : Private Banks | Mergers & Acquisitions | Foreign Banks

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