Subscribe to United Bank of India for listing gains:Religare

MUMBAI: Religare Capital Markets has advised investors to ‘Subscribe’ to initial public offering of United Bank of India for listing gains.

“United Bank of India has priced its IPO attractively at 0.8x post-diluted ABV as at end September ’09. While the bank’s below-average operating performance – slim margins, weak profitability and high cost profile – are causes for concern, the steep valuation discount vis-à-vis peers like Allahabad Bank, Dena Bank and Andhra Bank leads us to rate the issue as Subscribe.

We believe there could be listing gains of 10–15 per cent on the UBI issue; however a sustained upside to valuations would hinge on the management’s ability to invigorate operating parameters,” the report said.

UBI’s initial public offer of 50 million shares carries a price band of Rs 60–66/share. A Kolkata-headquartered bank, UBI has 1,505 branches with a predominant presence in east and northeast India. Postissue, the government holding in the bank would decline from 100% to ~84.2%.