The Hindu Business Line : United Western Bank gains ahead of board meet

THE stock of United Western Bank on Wednesday reacted positively ahead of the bank's board meet on Thursday. The stock finished at Rs 44.75, up 2.52 per cent, after touching a day's high at Rs 45.30 on the NSE.

The bank proposes to raise Tier-I capital. According to sources, three groups of major shareholders - Sicom, a Maharashtra Government outfit, bank staff and officers' unions and the Makharia family of Mumbai — have come to an understanding to let the bank go ahead with the plan. This could be considered as an out-of-court settlement because the Makharias had earlier opposed the proposal for bonus and rights issues.

According to market sources, this counter has an interesting potential for value play since the Makharias, who were also clients of the bank, are understood to be willing to settle other disputes too.

The bank (with a non-promoter holding of over 99 per cent) in 1998 had proposed to issue bonus shares in the ratio of 1:5 and issue rights in the ratio of 1:2 at a price of Rs 20 per share and had obtained the RBI permission for such moves. However, litigation came in the way.

Following an "understanding among the major group of shareholders", this time the board would consider afresh the issues of hike in capital as also bonus share.

The current paid-up capital of the company stands at Rs 29.89 crore.

According to a fund manager, the private bank becomes a value pick considering the present RBI policy framework for ownership and governance. "The new framework had made it easier for other banks, including foreign banks, to take control of small private banks. And particularly, banks that require strategic investments for growth but do not have a promoter to pump in the funds may become targets for acquisition and hence can throw up new value propositions", the fund manager added.

Banking industry insiders pointed out that United Western Bank under the draft RBI guidelines for minimum capital and net worth requirements would need fresh infusion of around six times its present capital base over a period of time.

According to market analysts, the bank may have to use a combination of rights and fresh issue to raise the capital base. Market also does not rule out the possibility of preferential allotments or private placements.

The bank, having 240 branches and a deposit base of around Rs 4,000 crore, made a provisioning of Rs 54.2 crore in the third quarter of 2004-05. Its current net NPA is at 9 per cent and the book value is around Rs 85.

"The fundamentals of the banks are showing signs of improvement because of provisioning as also efforts at recovery", Mr Pradip Hotchandani of Anagram Stockbroking, said.

The market sources expected that the farm and SME sectors, primary clientele for the bank, were well positioned for increased financial activity in view of the focus given in the 2005-06 Budget proposals.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Self regulatory body for brokers mooted

Abhimanyus of the financial markets

Narrow movement

United Western Bank gains ahead of board meet

Despite no assets and operations — Buyers flocking to SM Dyechem shares

NDTV up on diversification talk

Outlook may turn positive for BoB, OBC

SEBI fines Sterlite over pref allotment to Twinstar Holdings

Pivotals, small-cap stocks make gains

Gokaldas IPO subscribed 42 times