Punjab National Bank (PNB) announced the share exchange ratio for the proposed merger following its board meet on March 5.
After the share swap ratio of the three-way bank merger of United Bank of India and Oriental Bank of Commerce with Punjab National Bank was announced, United Bank of India feels its valuation appears “low” largely because of lower net worth compared to the other two lenders.
Punjab National Bank (PNB) announced the share exchange ratio for the proposed merger following its board meet on March 5. According to the swap ratio, 121 equity shares of PNB are to be exchanged for every 1,000 equity shares of United Bank of India, while 1,150 equity shares of PNB are to be swapped for every 1,000 equity shares of Oriental Bank of Commerce (OBC).
“It appears to be so. We are also hearing the concern. We are looking at it that why it is so low. It should not be,” a source at United Bank said when asked whether the Kolkata-based lender’s valuation appeared ‘low’ after the swap ratios were declared for the amalgamation.
On Friday, United Bank of India’s scrip fell by a whopping 19.92% to end the day at Rs 5.99 on the Bombay Stock Exchange, while OBC’s scrip was up by 2.76% at Rs 48.35. Shares of Punjab National Bank were down 5.79% at RS 42.30.
The government on March 4 approved a scheme for the amalgamation of 10 state-run lenders into four, effective from April 1, 2020.
“The share exchange ratio formula has been provided by the regulator. This is a formula-driven thing. And, the valuer is an independent and recognised firm. There was a merchant banker which was here to speed up the valuation part. Three independent valuers were engaged in this process,” the source cited above said, adding it was mainly because of the net worth United Bank of India’s valuation was affected.
“There are three different factors for calculating valuation. But net worth is a major parameter which carries a lot of weightage. On the basis of market parameters may be currently we (United Bank) are doing better. For the last few quarters our results have been good. But our finances were weak in terms of net worth,” the source told FE, adding although both PNB and OBC got plenty of capital during the government’s last capital infusion into PSU banks, United Bank did not get much of it.
“That capital (infused in to PNB and OBC) took care of their losses and their net worth remain elevated. We did not get that much of the capital. If we had got Rs 2000-3000 crore capital, then things would have been much better for us,” he added.