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GTB sizzles as partner hunt goes on

Mumbai, Feb. 16: Shares of Global Trust Bank (GTB) vaulted today on bourses rife with reports that the decks had been cleared for the entry of a strategic partner who would help end its balance-sheet blight.

The expectation was that the joint investment offer made by US’ Newbridge Capital and DBS of Singapore would be cleared, and proposals of Olympus Capital Holdings and Citicorp Venture Capital would be examined. The last two firms are reported to have joined the race for picking up a slice of the bank’s equity.

The meeting to pick a partner began at noon but ended inconclusively. Managing director Sudhakar Gande told The Telegraph late tonight that no specific decision was taken, but plans to pick an ally will be firmed up in March.

“Our board will meet again in the first week of next month,” he added. Today, presentations made by J M Morgan Stanley, Lazard and Ambit Corporate Finance on capital revamp were reviewed.

The entry of a strategic investor is part of a bigger plan to revamp capital and raise the funds required to meet the Reserve Bank of India’s capital adequacy rules.

GTB, having raised its authorised capital to Rs 350 crore, expects a capital infusion of over Rs 500 crore, likely to come from strategic investors and a rights issue.

The bank’s stock closed at Rs 29.60 on BSE in a gain of 5 per cent from its previous close of Rs 28.15. It hit an intra-day high of Rs 30.70 on a volume of 4.46 lakh shares.

The move to infuse fresh capital worth 49 per cent of its equity through foreign direct investment (FDI) was finalised in September last year. The board had allowed overseas investors to hold up to 49 per cent — the maximum that is permitted in a private-sector bank.

Stories about the hunt for partners who could bring in additional capital and take management control have been swirling in the capital markets since July last year. At one point of time, the speculation was that ING Vysya Bank was keen on a stake. At another, Sabre Capital, which picked up a strategic stake in Centurion Bank, was also believed to be in the running.

Newbridge entered later, but talks were put on hold due to differences on GTB’s equity write-off. Then, the US-based private equity investor joined hands with DBS.

GTB posted a net profit of Rs 5.58 crore in the second quarter ended September 30, 2003, a rise of 22 per cent. The six-month tally was Rs 10.17 crore. The focus on recovery of bad loans and better internal systems had helped it improve performance during the quarter.

GTB, which went into business on October 30, 1994, was the first Indian bank to attract equity participation from global multilateral institutions, including International Finance Corporation (IFC) of Washington. However, the bank’s exposure to sensitive sectors, like the capital market, smudged its balance-sheet.

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