The Telegraph
Since 1st March, 1999
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Seat safe for UTI Bank brass
HSBC keeps eyes glued to returns, not control

New Delhi, Dec. 3: HSBC Asia-Pacific Holdings (UK) today said it has no plans to exercise management control over UTI Bank, in which it picked up a 14.71 per cent stake.

“We have confidence in the existing management. This is just a financial investment as UTI Bank does good business, and is a parallel strategy to organic growth,” Niall Booker, chief executive officer of HSBC India, told reporters here today.

Late on Tuesday, HSBC Holdings said it bought the stake in UTI Bank from CDC Financial Services (Mauritius) and the South Asia Regional fund for Rs 306 crore. “We don’t expect to be treated in any significant way different from other shareholders,” he said.

“CDC and we took the view that it is difficult to transfer the rights. So, we would negotiate, on this point with other shareholders as and when required,” Booker added.

As per the agreement, the British bank would have an option to buy an extra 5.37 per cent from CDC for Rs 112 crore. It would also make an open offer to purchase a further 20 per cent at Rs 90 per share — the same price as the one at which it is acquiring the stake from CDC.

Booker said the bank had no plans to change the offer price for buying the additional 20 per cent, which would be announced tomorrow.

Currently, only 16 per cent of the bank’s shares are in public hands, while the rest are institutional holdings, traders said. The shares were traded at a high of Rs 115 on the Bombay Stock Exchange, making the open offer unattractive.

Asked about the bank’s strategy after the government issues fresh policy guidelines that will allow foreign banks to raise their holding to 74 per cent in private domestic banks, he said: “We would review the situation. As and when the situation changes, and the regulators agree, our position might also change.”

Earlier in February, finance minister Jaswant Singh had told Parliament in his budget speech that the government has plans to raise the ceiling on foreign stake in banks from the current level of 49 per cent.

“The acquisition is part of a long-term strategy and our business model for India is same as the one we have adopted in China,” Booker said, adding the bank has so far invested $90 million in India against $1 billion in China.

Booker also said HSBC might use UTI Bank’s platform and products, and vice versa, to extend the bank’s reach.

UTI Bank was founded in 1994 with a capital of Rs 115 crore (with UTI contributing around Rs 100 crore) after the government allowed the operation of private banks.

The rest of the capital was funded by Life Insurance Corporation (Rs 7.5 crore) and GIC and its four subsidiaries, which pumped in Rs 7.5 crore.

The bank provides corporate and retail lending, deposits and internet banking and has Rs 16,600 crore in deposits.

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