Government-owned Union Bank of India is looking to reduce the Centre’s stake by 8 per cent to around 75 per cent in the lender. According to the bank’s website, the Government of India holds 83.50 per cent in its total share capital. Now, the public lender is aiming to cut down the stake by raising fresh equity capital.
In this regard, the Union Bank of India board recently gave its nod to a capital raise of Rs 8,100 crore of which Rs 3,900 crore would come through issuing equity and Rs 4,300 crore from the issue of additional tier-1 bonds (AT-1) or tier-2 bonds.
The equity component of the capital raise was aimed at bringing down the government’s holding in the bank. “We do not want capital for growth. There is a statutory requirement to increase public shareholding for which we will raise equity,” Union Bank MD & CEO Rajkiran Rai told TOI.
Speaking on the AT-1 bonds and tier-2 bonds, the CEO shared that these new issues will replace the bonds that are maturing. The bank is a listed entity and at its present share price of Rs 36, the lender has a market cap of Rs 24,468 crore.
If it were to generate Rs 3,900 crore at this price level, the government’s stake would fall below 75 per cent on the expanded equity base.
“The valuations of the public sector were not the same as the private sector as there was uncertainty on which way the non-performing assets (NPAs) would go. The markets were not able to judge the impact of the amalgamation as generally across the world, amalgamations are not successful,” Rai said.
He added that the numbers now reflect the strength of the lender and expressed hope that may be the valuation of public sector banks in 2023 will be better.
Union Bank of India on May 13 reported over 8 per cent rise in standalone net profit at Rs 1,440 crore for the quarter ended March 2022. The lender had logged a net profit of Rs 1,330 crore in the same quarter of previous fiscal year.
Total income rose to Rs 20,417.44 crore during January-March 2021-22 as against Rs 19,804.91 crore in the year-ago period, the bank said in a regulatory filing.
For the full year 2021-22, standalone net profit jumped 80 per cent to Rs 5,232 crore from Rs 2,906 crore in previous year. Total income was down a tad at Rs 80,468.77 crore from Rs 80,511.83 crore in previous fiscal year.
