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'UTI Bank-GTB merger call-off was inevitable'

NetScribes/Pallavi Rao

There was a ring of inevitability right from the day the name, Ketan Parekh, was involved with Global Trust Bank.

With the finance minister sore over the way the banking and stock markets regulators bungled it up all over again, it was a foregone conclusion that the UTI Bank-GTB merger would be called off.

In fact, UTI was under tremendous pressure to call off the deal as the share price of UTI Bank was falling in tandem with GTB over the last couple of days and the rumour mills were churning out stories of how the merger deal was struck at a valuation that favoured GTB and Parekh.

"That Parekh had a wind of the merger was sure. That the GTB share rose on the news is also a fact; the issue is whether or not Sebi has the courage to disclose the irregularities," said a senior official at a private sector bank.

"Unfortunately, UTI's name was getting tarnished in the process, even though UTI has had close relationships with Parekh as well," he added.

Analysts expect positives for UTI Bank, since it has severed relationships with the Gelli-led bank. Global Trust Bank got a better valuation than UTI Bank for the swap ratio too.

"There has been an obvious pressure from the finance ministry. Ramesh Gelli, -- chairman, GTB -- after issues involving him and the Big Bull, still wanted a better ratio, which is not justifiable. Moreover, we will never know what the GTB accounts looked like for valuations," said an analyst with Khandwala Securities, a Bombay-based brokerage firm. The swap ratio for the two banks had been fixed at 9:4, in favour of Global Trust Bank.

"UTI will regain its lost value. We may see it returning to its original values of Rs 50 levels - levels just prior to the merger news. The GTB stock will remain stagnant now. It has already lost its value," said Manish Karwa, banking analyst, Pranav Securities.

The UTI Bank scrip closed at Rs 27.20, marginally higher than its previous close of Rs 25.20. The scrip was quoting at Rs 50 levels in January 2001, just before the merger news happened. Global Trust Bank closed at Rs 26.60, Rs 1.45 higher than its previous close. GTB has lost 74 per cent since January 2001.

"This is positive for UTI Bank. They had to call off the merger, which could have otherwise tarnished UTI Bank's image. A relationship with a bank surrounded by controversies would have done no good. This was bound to happen," said a banking analyst with an European investment bank.

Industry sources attribute the call-off to the fact that RBI wanted Ramesh Gelli, to step out of the new bank, which he unwilling to do.

"This is also one big reason why UTI Bank chairman, P S Subramanyan called the deal off", said the banking official.

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