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Nandita Datta
New Delhi, Sept 14: IDBI Bank, Timesbank and Centurion Bank have postponed their initial public offerings (IPO). The three private sector banks, which were supposed to tap the public this month, are now likely to hit the market around December.
It is learnt that these banks have sought the Reserve Bank of India's approval to extend their issues in view of the poor state of the capital markets. The Reserve Bank licensing requirement stipulates that all private sector banks bring down the promoters' holding gradually within three years of their operations.
According to merchant bankers, with the poor sentiments prevailing in the capital markets, these banks would have been unable to fetch a good premium had they gone ahead with their IPOs. ``In the absence of a good premium, it made little sense for these banks to tap the market and, hence, the decision to postpone their issues,'' says an official with a leading Mumbai-based merchant banker. Adds another merchant banker, ``Today, an investor can pick upbank stocks like SBI and BoI from the secondary market at an attractive PE. Besides, these scrips are currently trading at a steep discount to their book values. So, why should an investor put his money in a bank IPO where there is a risk of the scrip listing below the issue price.''
For IDBI Bank, this will be the second time it has sought RBI's approval to postpone its IPO. The bank was initially slated to tap the market towards the end of the last fiscal, but decided to postpone the IPO in view of its not-so-favourable financial performance.
During 1996-97, the bank's net profit was only Rs 3.7 crore on a total income of Rs 49.9 crore. In the ensuing fiscal, the bank saw a quantum jump in net profit to Rs 20.1 crore on a total income of Rs 166.9 crore. ``With an improvement in its financials, IDBI Bank was all geared up for its IPO in September.
However, the downturn in the equities market forced the bank to do a rethink. In all probability, the bank will tap the public towards the end of thiscalender year,'' adds the merchant banking official.
Four private sector banks -- J&K Bank, City Union Bank, South Indian Bank and UTI Bank -- have, however, braved the poor market conditions and have floated their IPOs. With the exception of UTI Bank, all the others have priced their issues at a substantial discount to their book values. For example, the South Indian Bank public issue has been priced at Rs 32 on a book value of Rs 50.18. Similarly, City Union Bank, with a book value of Rs 50.39, has priced its public issue at Rs 35. UTI Bank, which is banking on its parent's agent network to see its issue through, has priced its issue at a 51 per cent premium to its book value. However, it remains to be seen how these banks fare in the secondary market -- whether they manage to list at a premium or discount to their issue prices.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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