| Good news
Mumbai, Sept. 30: Shareholders of beleaguered United Western Bank (UWB) have reason to cheer: they might just be able to extract a little more for their holdings than the Rs 28-per-share offer that Industrial Development Bank of India (IDBI) has put on the table.
The Reserve Bank of India appeared to relent — at least partially — after a growing clamour from UWB shareholders for a higher compensation from IDBI, which has drawn up a revival plan for the troubled bank through a process of amalgamation.
This is the first time that the shareholders of a bank that has been placed under a moratorium are receiving a payout for their stake. On an earlier occasion when Global Trust Bank (GTB) was acquired by Oriental Bank of Commerce, shareholders of GTB were not so lucky.
The RBI today said that in accordance with the scheme of amalgamation, IDBI Ltd shall make an upfront payment in cash of Rs 28 per share to the members of UWB, who were, as on the prescribed date, registered as the holders of shares of the bank, in “partial satisfaction of their claim in respect of their interest in such shares’’.
“Further, in terms of the scheme, if any surplus remains after meeting all the liabilities out of the realisation of assets of UWB, the shareholders may receive pro-rata payment after the prescribed period,” the RBI said in a statement.
While it is clear that UWB shareholders may receive a surplus over the upfront payment of Rs 28 per share, this will come only after IDBI meets all the liabilities.
The government placed the bank under a moratorium on September 2 that was supposed to run till December 1. A number of banks had put in bids to take over UWB, which has close to 200 branches in Maharashtra. IDBI emerged as the surprise choice to revive UWB.
The amalgamation will come into force on October 3 and all the branches of UWB will function as IDBI branches with effect from this date.
It may be recalled that after UWB was placed under moratorium by the central bank, its shares rebounded after hitting a low of Rs 10 on expectations that the shareholders would not be left out in the cold.
After the RBI selected IDBI, there was more good news for UWB shareholders when it was clarified that the prescribed date of amalgamation will be the date when the government notifies the scheme. This removed fears that those investors who had acquired UWB shares after September 2, will be left out of the offer of Rs 28 per share.
The State Industrial Investment Corporation of Maharashtra (Sicom) is the largest shareholder of UWB, holding little more than 10 per cent.
When IDBI, along with many other banks, submitted an expression of interest with the RBI, the Sicom-HDFC-Maharashtra government combine also put in a Rs 350-crore proposal to rejuvenate the bank. It valued each share of the bank at Rs 32.40 per share against IDBI's offer price of Rs 28 a share.
According to RBI, customers, including depositors of UWB, will be able to operate their accounts as customers of IDBI Ltd with effect from October 3.