The bank's public issue which is expected to open during the second-half of January 1999, will offer four crore equity shares of Rs 10 each at a premium of Rs 7-10 per share, aggregating Rs 68-80 crore. UTI Bank's recent maiden issue at a price of Rs 21 per share had a marginally higher P/NAV of 1.51.

The scrip, which was listed on the Bombay Stock Exchange in November, currently quotes at Rs 16, a discount of 24 per cent over its issue price. The market has discounted UTI Bank largely on account of its high level of non-performing assets (5.63 per cent). IDBI Bank, on the other hand, has NPAs as low as 0.44 per cent.

ICICI Bank, which came out with its public issue in the last financial year, had the highest P/NAV (2.69) among all the new private bank issues. IndusInd Bank, which went public the same year, priced its shareat a P/NAV of 1.93. Both scrips are currently quoting well below their issue prices. While ICICI Bank quotes at Rs 24 against an issue price of Rs 35, the IndusInd scrip is hovering at Rs 21, against its issue price of Rs 45.

IDBI Bank has forecast a net profit of Rs 26.13 crore for the year ended March 31, 1999, a 30 per cent rise over the 1997-98 net profit of Rs 20.05 crore. The bank predicts its total income to grow by 80 per cent to Rs 300.29 crore.

However, officials at IDBI Bank have admitted that there has been no corporate demand for funds during the current financial year. ``Corporates have been accessing funds through non-convertible debentures and commercial paper to reduce their borrowing costs. This has brought our spreads under severe pressure,'' said a IDBI Bank senior official.

Unlike HDFC Bank and ICICI Bank which are focussing on the retail finance business, IDBI Bank plans to build its asset base only through corporate lending. It will, however, continue to depend on retail depositsto keep its liability costs low.

In line with the market mood

The story for Indian banks has only gotten worse since the UTI Bank issue. Bank stocks no longer hold any attraction for investors that they did even a few months ago say, at the time of the Jammu and Kashmir Bank issue. At present, with the exception of the SBI, there is no bank that has kept above the issue price.

And even the SBI stock has been trading below its listing price of Rs 230 for several months now. IDBI Bank in all probability will have the distinction of being a very fairly priced issue, despite the fact that the prospective price earning multiple will be between 9 and 10.75 times. The issue has been priced keeping in mind the banks strengths as well as the markets mood.