NEW DELHI, July 2: Notwithstanding an across-the-board crash in stock markets, the Rs 21-crore public issue of City Union Bank has sailed through with an encouraging response from retail investors. The public issue priced at a premium of Rs 25 has been subscribed by 1.3 times, according to City Union Bank chairman V Narayanan.The bank, which had offered 60 lakh equity shares, received applications for around 80 lakh shares. ``Of this, around 80 per cent is from retail investors, '' he said. However, institutional response has not been encouraging with only LIC and GIC putting in bulk applications. A majority of the balance 20 per cent subscription is believed to have come from private sector banks and no public sector bank has subscribed to the issue.
Although the bank charged a high premium of Rs 25, considering its small size and concentration in Tamil Nadu, the retail response seems to be overwhelming. The bank hit the market with its equity issue at a time when the bears were ruling the roost. Bankscrips were no exception and almost all bank shares, which had tapped the market in the past one and half years, were trading below their offer prices.
Surprisingly, large public sector banks like Dena Bank, Bank of India, ICICI Banking, Bank of Baroda, State Bank of Bikaner and Jaipur and State Bank of Travancore were trading below their offer prices at the time of City Union Bank's issue. Bank of India was trading at around Rs 35 (which is also the offer price of City Union Bank), Dena Bank at Rs 20, ICICI Banking around Rs 37, Bank of Baroda at Rs 80, SBBJ at Rs 380 and SBT at Rs 400. In fact, the banks with heavy regional presence like SBBJ, SBT and Dena Bank have failed to provide an exit opportunity to investors.
City Union Bank, which is mainly operating in Tamil Nadu, had not reserved any shares for non-resident Indians, mutual funds, banks and financial institutions. The bank has a high NPA-level at 8.55 per cent. The gross NPA as on the nine-month period ended December 12, 1997 stood at Rs 70crore.According to the estimate for financial year 1998, the book value is Rs 36.58.
The bank had projected a net profit of Rs 12 crore (total income Rs 145 crore) for fiscal 1998, Rs 15 crore (Rs 196 crore) for 1999 and Rs 21 crore (Rs 256 crore) for 2000. For the fiscal 1998, EPS works out to Rs 6.69 on pre-issue capital. On expanded capital of Rs 24 crore, EPS figures are Rs 6.25 and Rs 8.87 for fiscal 1999 and 2000 respectively. Lead managed by SBI Capital Markets, the issue opened closed on June 27. The shares will be listed at Mumbai, Chennai and NSE.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
