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HSBC offer price fails to excite institutions

Calcutta, Dec. 3: Unit Trust of India (UTI) — the principal promoter of UTI Bank — and other large stakeholders are unlikely to participate in HSBC’s public offer for 20 per cent of the bank’s shares at Rs 90 apiece, say investment bankers and analysts.

Most analysts believe HSBC had offered to buy the 33.46 per cent stake owned by the Trust before knocking on CDC’s doors. It appears UTI was not impressed with the price offered by HSBC, say analysts.

There’s no official word on it yet. Asked whether the Trust would participate in HSBC’s offer, UTI board member D.S.R. Murthy said: “I couldn’t answer that question till the board has discussed HSBC’s offer.”

Chairman M. Damodaran, who had previously said Unit Trust would consider offloading its stake in UTI Bank if offered an attractive price, could not be contacted. He was reported to be meeting finance ministry officials in Delhi.

Other key shareholders like Life Insurance Corporation of India (LIC), General Insurance Corporation (GIC) and the Citi Group are also likely to ignore the offer, say investment bankers.

LIC and GIC were amongst the promoters of the bank and hold 13.5 per cent and 7.39 per cent respectively.

The Citi group owns 7.66 per cent of the bank’s shares through two entities — Citicorp Banking Corporation and Chryscapital — both holding 3.83 per cent apiece.

The deal pushed up UTI Bank’s shares by 20 per cent today. The stock is closed at Rs 115 — Rs 25 higher than the price offered by HSBC. Analysts say UTI Bank looks strong at this level, and it’s unlikely that market price will fall below Rs 90. Unless HSBC revises its offer, there’ll be hardly any retail participation either.

At least a couple of other public offers have flopped recently for the same reason.

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