Rounding off UTI's misery for the year is the recent dismal opening its banking sibling, UTI Bank Ltd (UBL), received on the Bombay Stock Exchange (BSE) on listing.

As against the offer price of Rs 21 per share, the UBL scrip opened for trading on November 27 at Rs 17.75 apiece, that is more than 15 per cent below the offer price. As if this were not enough, barely minutes later the scrip dipped to Rs 13.55 before recovering some ground to end the first day at Rs 17 per share -- a straightloss of 19 per cent on the issue price. On November 30 and December 1, the second and third trading days, the UBL scrip hovered around Rs 17.30 and Rs 15.50. The closing price on December 1 was Rs 16.95 apiece.

In terms of volume, the opening day witnessed only 4,200 shares changing hands in 27 trades. It, however, picked up a little on the next two trading days. While 26,400 shares were transacted in 99 trades on the second trading day, the third day recorded a volume of 24,700 shares in 115 trades. The low volume per trade recorded at the UBL counter on BSE during the first three days seems to indicate the presence of retail investors.

The scrip's performance was unchanged on the fourth day, ie December 3, opening at Rs 17.20 and closing at Rs 16.95, up 10 paise from the lowest quote for the day. In all 90 trades produced a volume of 20,400 shares. However, on the NSE, the scrip commanded a muharat quote of Rs 19.45 on December 3. It then slipped to Rs 16.80 and closed at Rs 17, with a volume of107,600 shares in 432 trades.

Although UBL has made its debut on both the BSE and NSE, it is yet to open for trading on the Ahmedabad Stock Exchange (ASE). Incidentally, ASE is the `principal' stock exchange of UBL, which has its registered office in Ahmedabad.

Readers may recall that in September, 1998, UBL had come out with a maiden composite issue of its equity shares: a public offer of 1.50 crore shares and offer for sale by UTI of 2 crore shares, both at a premium of Rs 11 per share. The Rs 73.50-crore offer was itself a huge climbdown from UBL's lofty plans envisaged in 1996. The indication then was that the float size would be about Rs 500 crore. Of course, the premium demanded from public investors was in line with the Rs 5 to Rs 15 band that UBL had earlier hinted.

In spite of the massive downsizing of the issue by almost 85 per cent to Rs 73.50 crore, the issue could not garner much investor enthusiasm. It is quite apparent from the basis of allotment that the issue managed to scrape throughonly due to eye-catching bulk subscriptions. Perhaps that explains UBL's strange behaviour on two counts.

Soon after the composite offer, UBL had reportedly instructed its registrars to the issue, Karvy Consultants, not to divulge the collection figures even to SBI Caps, UBL's lead manager. Next, possibly taking shelter under the fineprint in Sebi's listing guidelines, UBL published the basis of allotment only in Ahmedabad, where it is registered, ignoring the metros from where the issue would have got majority response.

The basis of allotment reveals that even its employees did not apparently repose their total faith in UBL's success. As against a negligible reservation of 2.2 lakh shares for about 440 regular/permanent employees, only 1.6 lakh shares were taken up by 400 employees. As against this, in South Indian Bank's (SIB) recent public offer, for example, the employees quota was subscribed about 1.5 times.

If its net offer to the Indian public is taken into account, UBL received 102,376applications for 5.01 crore shares against an offer of 3.48 crore shares. Though the figures may, prima facie, imply that the issue was comfortably subscribed, a second look at the pattern and composition of the subscription received by UBL suggests otherwise.

For instance, 98.7 per cent of the total number of applicants bidding for less than 1,000 shares accounted for 2.46 crore shares, or about 70.69 per cent of the net public offer. As against this, the remaining 1.3 per cent of the total applicants bid for a phenomenal 2.56 crore shares in UBL. The average size of a typical bulk application works out to a very high 18,900 shares, which is evidence enough that the issue did not exactly sail through.

In terms of allotment, while 1.93 crore shares, that is 14.86 per cent of UBL's post-issue equity have been allotted to over one lakh small investors, 1.56 crore shares, or 12 per cent of equity, have been allotted to the 1,000-odd bulk investors.

Considering that about 73 per cent of UBL's equity isheld by UTI, LIC, GIC and its subsidiaries, from the trading point of view, this chunk will remain practically dormant. Now with foreign institutional investors (FIIs) and mutual funds shunning banking stocks, and also in view of the below-average performance of UBL thus far, it is hard to visualise, therefore, any bulk buying interest occurring in the counter in the near term.

Under the circumstances, the UBL scrip's immediate price line will be largely determined by the public offer allottees. Among them, normally one would expect small investors to be reluctant to book losses on their subscription price. But the same cannot be said about the bulk investors. The latter could press sales in at least two situations: One, if they find alternative avenues for investment at better returns and, two, if they expect the stock to go down further.

Nonetheless, the available trading evidence in the UBL counter so far suggests that even the smaller investors might not be averse to limit their losses. If, asfeared, the bulk allottees also switch to the selling mode, UBL's price line could plummet to new depths.

(Arranged by Investar -- The Aarthik News & Research Syndicate)