9:4 swap for UTI Bank-GTB merger

By Our Special Correspondent

MUMBAI, JAN. 27. The boards of UTI Bank and Global Trust Bank have agreed to recommend shareholders a swap ratio of 2.25:1, that is, nine shares of UTI Bank for every four shares of Global Trust Bank.

In order to enhance the attractiveness of the merger to shareholders by increasing the earnings per share (EPS), by minimising the number of additional shares in the new entity, the amalgamation will be achieved by merging UTI Bank into Global Trust Bank, notwithstanding Unit Trust of India (UTI) being the principal shareholder of the merged bank.

The boards considered and approved the merger at their respective meetings held today. They have also decided to convene extraordinary general meetings (EGM) of their respective banks on February 24.

``The exercise of merger is contemplated in the spirit of equality and partnership,'' said Mr. P. S. Subramanyam, Chairman UTI, while addressing a press conference here today. According to him, the merged bank is expected to effectively combine the strengths and complementary features of the two banks and emerge as a well capitalised institution in the banking sector.

The merger is expected to result in one of the largest private sector banks in the country with a deposit base of around Rs. 16,000 crores and advances of around Rs. 7,900 crores. There would be increased geographic coverage with a network of 157 branches and 321 ATMs.

It is proposed that the merged bank would be named `UTI Global Bank' with Dr. P. J. Nayak as the CMD, and Mr. Sridhar Subasri as the Executive Director. Further, it is proposed that UTI Global will foray into the insurance sector which would be spearheaded by Mr. Ramesh Gelli as Chairman and Managing Director, ``thus drawing upon his proven record of creating and building institutions.''

Mr. Subramanyam said the merger would be completed by February 28 and the new bank would present its first balance sheet as of March 31, 2001. He also said the directors of UTI Global would have eight members from the UTI group and four from among Global Trust shareholders. The UTI chief said the management was expecting nil redundancy as far as employees are concerned and would even take efforts to retain employees. He said negotiations were already on with foreign entities for the bank's insurance venture.

UTI Global Bank is expected to become the largest private sector bank in the country with a combined balance sheet size of nearly Rs. 20,000 crores. Talking to The Hindu, Mr. Gelli said UTI Global Bank planned to achieve Rs. 50,000 crore in 2003-04.

The shareholding structure of the merged bank, UTI Global Bank, would be: UTI 19.8 per cent (356 lakh shares), promoters (GTB) 16 per cent (287 lakh shares), FII/ NRIs/OCBs 12.8 per cent (229 lakh shares), International Finance Corporation, Washington, 7.8 per cent (140 lakh shares), LIC 1.9 per cent (35 lakh shares), GIC and its subsidiaries 1.8 per cent (33 lakh shares), GTB Employee Trust 1.2 per cent (23 lakh shares), banks/FIs 1.7 per cent (31 lakh shares), Indian mutual funds 0.2 per cent (4 lakh shares), and public 36.8 per cent (662 lakh shares). The recent mergers of banks shows that a strong institutional backing is playing a key role in the growth of private sector banks.

The recent tie-ups, Times Bank with HDFC Bank, Bank of Madura with ICICI Bank and the merger of UTI Bank and Global Trust Bank point out this fact.

Our Hyderabad Staff Reporter writes:

The GTB, set up in 1994, has an aggregate deposit base of Rs. 7,433 crores and advances of Rs. 3,612 crores as of December 2000. It has a network of 78 branches and 80 ATMs. The UTI Bank, which was set up in 1993, has 79 branches and 241 ATMs. Its deposit base is Rs. 8,232 crores and advances Rs. 4,292 crores.

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