Union Bank of India, incorporated in 1919, has come a long way in terms of branches, assets and disposals. The bank's advance and deposits have grown at a CAGR of 12% and 16% respectively over the last five years.
The total branch network of the bank, as of March 2002, stood at 2,023 with rural branches accounting for 40% of the total network. Urban and metropolitan branches account for 40% with semi-urban branches accounting for the rest.
Total deposits of the bank as on March 2002 stood at Rs 397 bn and total advances at Rs 214 bn in the same period. The bank's top three exposure in terms of sectors are chemicals (13%), iron & steel (11%) and textiles (10%).
The two major objectives of the public issue are:
Augmenting long-term resources of the bank.
To meet future capital adequacy requirements.
The capital adequacy ratio of the bank as of March 2002 was 11%, which would go up after the public issue.
The bank is currently 100% owned by the Government of India. Post the IPO, the stake is expected to come down to 61%.
The Indian banking sector has come a long way over the last few years. De-regulation and the entry of private and MNC banks have forced PSU banks to reinvent themselves in order to meet the ever-increasing customer demands.
Technology has gained the top-most priority in banking sector to improve productivity and enhance competitiveness.
With the apex bank preferring a softer interest rate regime, interest spreads of banks have come under pressure. Given the intensity of competition, consolidation has gained importance.
Objects of the Issue:
Government banks would continue to remain out of the cluster of potential acquisition targets. This is due to the fact that FDI cap on these banks still remains at 20% level.
Although, the government intends to reduce its stake in these banks to 33%, it will continue to retain control. So privatisation of these banks is unlikely to take place in the near term.