| Waiting for a friend
Mumbai, Dec. 7: Global Trust Bank has zeroed in on Development Bank of Singapore (DBS) as a possible partner that will be given a 49 per cent equity stake.
Merchant banking mavens say DBS will be required to invest $100 million (Rs 455 crore) for the shares. It will have to infuse some more money for recapitalisation.
The loss-laden private bank’s assets account for just 2 per cent of DBS’; it is ranked 32nd here on that count. GTB, will provide DBS, which currently has just one branch in Mumbai, a wider platform in India.
The probable arrangement is expected to be a win-win deal for both sides. DBS is eyeing India for widening its business, while GTB is keen on a strategic partner to bail it out with a fresh infusion of capital. Further, with 100 branches in strategic places, GTB will give a readymade toehold to any foreign bank keen on a presence in India. Moreover, GTB is perceived as a tech- savvy bank.
GTB, a private sector bank promoted by Ramesh Gelli, has been facing difficult times ever since the securities scam of 2000 unfolded and its attempt to merge with UTI Bank went awry.
The stock markets are already sniffing a deal and the GTB share has perked up on bourses and several block deals have taken place. The GTB share has seen its value and volumes rising in the past few days. It closed at Rs 28.45 after hitting Rs 31.35 with 1.2 million shares traded.
Earlier, Newbridge Capital was thought to be its probable partner. However, differences of opinion on the proposed writing down of capital have put the talks on hold.
Merchant banking analysts said the GTB management and J. M. Morgan Stanley, its adviser on capital restructuring, along with the Singapore-based merchant banking arm of Deutsche Bank are close to an agreement on placing GTB’s equity with DBS.
GTB’s financial position is weak and sources said the gross non-performing assets are 25 per cent of its loan books. Recently, it made extraordinary provisions of Rs 300 crore to partially clean up its loan book.
GTB officials have said the bank is pursuing three options — a financial adviser, a strategic investor and a rights issue.
Ramesh Gelli and associates hold 20.28 per cent of the bank's equity.
DBS has one branch in Mumbai and its presence is mainly in the corporate and treasury businesses. Currently, a bank operating in India is not allowed to pick up more than 30 per cent in another bank.
DBS may decide to merge its branch with GTB. If that happens, the deal will follow Centurion Bank's capital restructuring model, where BankMuscat is merging its operations in Bangalore with Centurion.
For DBS Group Holdings Ltd, if the acquisition in India fructifies, it will be a series of expansion moves that has seen the bank making a foray into Hong Kong, Thailand and Indonesia.
DBS Group Holdings had announced the completion of the legal merger of Dao Heng Bank Limited, DBS Kwong On Bank Limited and Overseas Trust Bank Limited.