Pvt banks overtake PSU banks in IPO collection

Pvt banks overtake PSU banks in IPO collection
ENS ECONOMIC BUREAU

Mumbai, August 3: The hegemony of public sector banks in fund mobilisation in the primary market is over. Private sector banks displaced PSU banks in collections through public issues in the 1999-2000 fiscal, according to a study.

The study, conducted by Prime Database, said out of a total of Rs 30,435 crore of collections in public issues, the private banks accounted for 69 per cent while PSU banks accounted for 31 per cent. ``Thirty private sector banks had a collection of Rs 21,078 crore while 27 PSU banks collected Rs 9,357 crore. Within private banks, foreign banks had a collection of Rs 9,233 crore.

The reversal of trend, according to Haldea, was indicative of the growing competition being provided by the private sector to PSU outfits in several areas of banking. In this case, the turnaround came mainly by virtue of more efficient and faster services being provided by private sector banks both to the issuers as well as to the investors. Also responsible for the trend was the increasing incidence of public issue financing services provided by the private sector banks.

According to Haldea, one of the reasons why PSU banks used to dominate the scene was their automatic appointment as collecting bankers in cases where project appraisals had been done by them. With most issues now not going in for appraisal, the corporates were no longer obliged to select such bankers. Moreover, earlier guidelines required companies to have collecting branches in over 70 towns, necessitating the use of PSU banks' reach as private banks did not have branches in most towns. The revised guidelines now require a company to have collection centres only in 20 towns, most of which have branches of the private sector banks.

This marks a reversal of trend as until now, PSU banks had dominated as collecting bankers to public issues, according to Prime which conducted the study covering all the 65 public issues floated during the year, except the bonds issues of ICICI for which the data was not available. Their share in both 1997-98 and 1998-99 was a high 67 per cent, with eight PSU banks among the top ten in 1998-99.

However, in the 1999-2000, only four PSU banks figured in the top ten list towards the bottom of the table.

Leading the Prime table in 1999-2000 was Citibank with total collections of Rs 4,349 crore (collections represent number of shares applied multiplied by amount payable on application). The second position was taken up by ICICI Bank at Rs 4324 crore, followed by HDFC Bank at Rs 3,125 crore and Deutsche Bank at Rs 2848 crore.

The first among PSUs was Corporation Bank with a collection of Rs 2672 crore followed by Central Bank of India at Rs 1606 crore, Vijaya Bank at Rs 840 crore and Canara Bank at Rs 817 crore. In the top 10, the other two banks were Oman International (Rs 1645 crore) and Centurion Bank (Rs 1496 crore).

Prithvi Haldea of Prime pointed out that the year's collections of Rs 30,435 crore represented an over 5-fold increase over the previous year's figure of Rs 5,527 crore and an over 7-fold increase over the 1997-98 figure of Rs 4,484 crore.

The increase in float accounted for not only to a larger number of public issues but also to the huge oversubscriptions which most of the ICE sector issues obtained. In fact, of the total 38 issues from this sector, as many as 8 sold more than 100 times each and another 24 issues between 10 and 100 times. Even the balance 6 issues sold more than 3 times each.