Financial Daily from THE HINDU group of publications
Friday, Mar 11, 2005
Money & Banking - Overseas Borrowings
HSBC stake in UTI Bank to drop to 12.5 pc after GDR
Mumbai , March 10
HSBC'S shareholding in UTI Bank will come down to 12.5 per cent from 14.6 per cent after the proposed global depository receipts (GDR) issue of UTI Bank, Mr Niall S.K. Booker, Chief Executive of HSBC India, said on Thursday.
UTI Bank has reportedly received Government clearance to raise $ 200 million through issue of GDR.
Mr Booker also said HSBC is in talks with the Reserve Bank of India on the issue of bringing down the bank's stake in UTI Bank to five per cent, in accordance with the latest RBI guidelines. "We will do what the regulator tells us."
He, however, said that RBI has not given any timeframe for banks to reduce their stake in other banks. "It is too early to determine if we will phase out our investments in UTI Bank," he said.
HSBC has no plans to invest in UTI Bank's GDR issue, said Mr Booker, though in theory the bank is allowed to. "We want to take a friendly approach with RBI," he said.
"We are reasonably happy with our investment in UTI Bank. The market price of UTI Bank is ruling over Rs 240 a share as against our purchase price of Rs 90," said another official with HSBC.
UTI Bank shares ended three per cent higher, closing at Rs 257.10 on Thursday, probably on account of HSBC's comments on its investments in UTI Bank, said brokers. Investors feel reassured that HSBC will not dump UTI Bank shares in the market, they said.
HSBC had acquired 14.6 per cent stake in UTI Bank from CDC Capital in 2003 for Rs 90 per share.
Addressing a press conference to announce HSBC's plan to inject additional capital of $180 million into its Indian operations, Mr Booker said the bank's thrust now is on organic growth. Whereas inorganic growth depends on opportunity. It would be too early to say whether HSBC would invest in a financially weak bank, identified by RBI for restructuring. Such a decision would have to make economic sense when substantial investments are involved, he added.
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