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INDIA
BUSINESS WORLD -
FEBRUARY 2006
THE MONTH THAT WAS HSBC SELLS 7.19% IN UTI BANK
THE British bank HSBC has sold a bulk of its shareholding in UTI Bank, two years after it had acquired a 14.71% stake in the local bank. HSBC sold 7.19% stake in UTI Bank to a clutch of foreign portfolio investors for Rs 638 crore, at an average price of Rs 318.6.
The transactions could have been driven by the Reserve Bank of India stricture that no foreign bank with branch operation in India can hold more than 5% in a domestic bank. With this the HSBC's holding in UTI Bank is at 4.99%.
The sharp rise in the stock market has helped the UK bank to clock in a 253% return from the UTI Bank deal in a little over two years. Post UTI Bank's GDR offering last year, HSBC's stake in the bank was at 12.19%. HSBC Asia Pacific Holdings (UK) Ltd had taken a 14.71% stake from CDC Financial Services (Mauritius) Ltd and South Asia Regional Fund for Rs 306 crore ($66.42 million) at Rs 90 per share.
HSBC divested 20.03 million shares in tranches. It sold around 3.9% stake in morning trades at an average price of Rs 317.8 and the rest in the afternoon. The bulk of these shares were purchased by Sovereign Global through Crown Capital (88.76 lakh at Rs 319.50), The Master Trust Bank (27.86 lakh at Rs 317.8) and Fidelity Funds Mauritius (55.73 lakh at Rs 317.80).
The UTI Bank scrip closed at Rs 320.2 on BSE. The bank has been under pressure to bring down its holdings in UTI Bank. Last year, RBI had said that foreign banks with operations in India can hold only up to a 5% stake in the bank, following which HSBC had told RBI that its stake in UTI Bank would come down as the private bank raises capital.
Though HSBC had an option to buy an additional 5.37% of UTI Bank from Actis for another Rs 112 crore ($24.26 million), RBI did not permit the stake sale to HSBC and CDC had to sell the shares in the open market. The RBI had placed restrictions on HSBC while allowing the initial sale. It had said that HSBC cannot buy additional stake in UTI Bank, or have a directorship in the bank; further, its transactions with UTI Bank were also restricted. While RBI had allowed the bank to have day-to-day transactions, strategic transaction were barred. Incidentally, another UK bank Barclays Capital Mauritius also has a 4.99% stake in UTI Bank
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