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M. Ramesh

Turnaround hopes trigger optimism

Chennai , Sept. 19

The `strategic business alliance' of Indian Bank, Corporation Bank and Oriental Bank of Commerce has buoyed hopes for the revival of Indian Bank's subsidiary, Indbank Merchant Banking Services Ltd.

Sources in the three banks told Business Line that it is possible that Indbank Merchant Banking could be converted into a three-way joint venture.

IndBank Merchant Banking is turning around and a possible infusion of funds from other banks could help accelerate the process of revival.

Officials of Indian Bank point out three specific reasons to show that Indbank Merchant is on the turnaround path.

Reasons for turnaround

First, the bank has recently obtained shareholders' approval for setting off its accumulated losses (Rs 97.72 crore as on March 31, 2006) against the balance in the share premium account of Rs 66.60 crore. The remaining losses "could be wiped out through profits to be made from the operations of the company and by disinvestments of quoted shares," notes the company's annual report for 2005-06.

The `disinvestment of quoted shares' is the second reason for hope for Indbank's turnaround. The company has 6.4 lakh shares of Punj Lloyd. The cost of these shares to Indbank works out to Rs 78 per share. Punj Lloyd on Tuesday closed on the BSE at Rs 780, which means that Indbank's investments are worth Rs 50 crore as on Tuesday. At Tuesday's prices, Indbank is sitting on a profit of Rs 45 crore on its Punj Lloyd investments, more than enough to wipe out the accumulated losses. However, because of the lock-in period regulation, Indbank can sell Punj Lloyd only after December 29.

Third, because of renewed efforts of Indian Bank, Indbank is getting more business. Recently, the company earned a fee-income of Rs 42 lakh for loan syndication services rendered to a large company. Broking business is picking up — today, Indbank has 2,700 active broking clients.

According to Mr S.K. Bandyopadhyay, General Manager, Indian Bank, a plan approved by the board of Indbank envisages adding six branches to the company's existing six this year, and another six next year. "By next year, Indbank will be one of the leading merchant bankers in the country," he told Business Line on Tuesday.

Other sources in the banks indicate that over time, Indbank could require capital. Additional shares could be issued to Corporation Bank and Oriental Bank of Commerce, so that they become co-promoters and there is cash inflow into the company.

Business would then flow from the other two banks' clientele too, sources said.

Indbank on Tuesday closed at Rs 8.43, 13.92 per cent higher than previous closing of Rs 7.40. As many as 96,757 shares changed hands on the BSE.

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