House full: No room for HSBC on UTI Bank board

MUMBAI: The Reserve Bank of India has denied HSBC possible management control or board representation in UTI Bank, even while allowing the British banking group to complete the transaction that would give it 14.71% equity in the local private bank.
The regulator has also laid down that any further investment by HSBC group in UTI Bank shares cannot happen without RBI''s permission.
The HSBC group had entered into an agreement in December with Actis (formerly CDC) to buy 14.71% in UTI Bank, with the option to buy another 5.37% at a later point.
RBI has allowed HSBC to acquire only 14.71%. Under the circumstances, CDC may sell the 5.37% stake to other financial investors in the market. Alternatively, if HSBC is still keen to buy the stake, it will have to make a fresh application to RBI — a possibility which looks remote now. Thus, HSBC would have to abandon any “strategic� plan it might have had with UTI Bank.
At one point HSBC had indicated that it would bid for UTI’s stake in UTI Bank when it is put on the block.
An HSBC spokesperson said, “We are examining the RBI’s letter.. We are not in a position to comment.�
HSBC Asia Pacific Holdings (UK), a wholly owned subsidiary of The Hongkong and Shanghai Banking Corporation, had signed the agreement to buy the 14.71% stake for Rs 90 per share. After receiving the proposal, the UTI Bank board had approved the deal and sent it to RBI for its approval.
While Actis has two members on the bank’s board — Paul Fletcher and Donald Peck, sources said that since HSBC is a competing bank, UTI Bank would not be interested to have any HSBC nominee on its board. With the part transaction getting cleared, Actis may have to relinquish at least one member from the UTI Bank board.
HSBC had earlier got approvals from agencies like Foreign Investment Promotion Board and Sebi. An open offer was ruled out by Sebi since voting rights in a private bank is capped at 10%.
According to the terms of the agreement which was signed between HSBC and Actis, HSBC had to take a final call on the deal by around end May. The money which has to be paid by HSBC to Actis for the transaction is lying in an escrow account. Actis clearly stands to gain from the development since it sells the balance 5.37% at a price well above Rs 90, with the scrip closing at 125.65 on the BSE on Thursday.
Many foreign banks are keenly interested in UTI Bank. UTI holds a 33.44% stake, LIC 13.49% and GIC and its subsidiaries 7.71% stake in the bank. These banks are looking at buying the UTI stake in the bank as they feel that even LIC and GIC would exit the bank at a point. However, they may not be interested in the 5.71% block with HSBC already holding close to 15%.