Govt’s stake in Union Bank to go below 75%

MUMBAI: Union Bank of India aims to bring down the government’s stake in the lender to around 75% from 83% by raising fresh equity capital. The bank’s board recently approved 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.
Union Bank MD & CEO Rajkiran Rai told TOI that 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,” he said.
On the AT-1 bonds and tier-2 bonds, Rai said that the new issues would replace the bonds that are maturing. At its current share price of Rs 36, Union Bank has a market cap of Rs 24,468 crore. If the bank were to raise Rs 3,900 crore at this price level, the government’s stake would fall below 75% 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. The numbers now reflect the strength of the bank and may be the valuation of public sector banks in 2023 will be better,” said Rai.


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