Takeover of Weaker Banks

The Reserve Bank of India appears inclined to encourage takeover of weak/sick urban co-operative banks (UCBs) by domestic scheduled commercial banks (SCBs).

According to the central bank, where proposals for amalgamation within the UCB sector (i.e. amalgamation of weak/ sick UCBs with strong UCBs) are not forthcoming, it is proposed to provide Deposit Insurance and Credit Guarantee Corporation support to the amalgamation scheme involving transfer of assets and liabilities (including branches) of legacy cases of UCBs to domestic SCBs.

Takeover legacy

The takeover of legacy cases of UCBs – UCBs having negative networth as on March-end 2007 – by domestic SCBs will be allowed provided the amalgamation scheme ensures 100 per cent protection to depositors, the RBI said in the second quarter review of its monetary policy for 2009-10.

The prospect of acquiring a readymade infrastructure and business could prompt SCBs, especially from the private sector, to pursue acquisition of weak UCBs, said Dr Vinayak Tarale, Secretary, Mahahrashtra State Co-operative Banks’ Association.

In case the amalgamation scheme provides for each depositor (of a weak UCB) being paid or credited with, on the date on which the scheme comes into force, an amount which is less than the original amount and also the specified amount, the Corporation, according to the provisions of the DICGC Act, will pay to depositors the difference between original amount and the amount so paid or credited/ the specified amount, whichever is less.

Guidelines

The central bank said it will be issuing detailed guidelines on DICGC supported transfer of assets and liabilities of UCBs to SCBs in legacy cases.

According to the RBI’s latest report on Trends and Progress of Banking in India, out of 1,721 UCBs in India, 23 per cent or 392 UCBs fell in the weak and sick banks category as of March-end 2009

Indiabulls Power, a subsidiary of Indiabulls Realty has fixed its initial public offering (IPO) price band at Rs 40-45 per share. The minimum bid lot will be 150 equity shares.

The IPO of 390, 700,000 equity shares, including a green shoe option of retaining 50,900,000 equity shares will open for subscription on October 12, 2009 and close on October 15.

Updates on Stocks

UTV Software Communications Ltd has informed BSE that the Hon'ble High Court of Judicature at Bombay by an Order made on the September 11, 2009, has directed that a meeting of the equity shareholders of the Company be convened to consider and approve the Scheme of Arrangement relating to UMP Plc, UTV Motion Pictures (Mauritius) Ltd. and the Company. The said meeting will be held on October 14, 2009.

Jindal Cotex to List on 22 September 2009

Acrylic and polyester yarn maker Jindal Cotex will list on the Bombay Stock Exchange and the National Stock Exchange on 22 September 2009.

The Ludhiana-based company had fixed issue price at the top end of the Rs 70 - Rs 75 a share price band set for the initial public offer (IPO).

The issue price of Rs 75 discounts the company's year ended March 2009 earnings per share (EPS) of Rs 1.7 by a price earning (PE) multiple of 44.11.

The public issue, which closed on 1 September 2009, was subscribed 2.20 times. The company got bids for 2.47 crore shares as against 1.12 crore shares offered.

Market Today

trong response to the initial public offer of Oil India, an
improvement in business confidence of India Inc and revival of
monsoon rains helped key benchmark indices extend gains for the
second running day. The Sensex surged 327.20 points or 2.09% to
16,016.32, up 223.05 points from the day's low and off just 19.18
points from the day's high. The barometer index BSE Sensex surged
past the psychological 16,000 mark in late trade. Both the
frontline indices - the BSE Sensex and the 50-unit S&P CNX Nifty
settled at their highest level in more than 15 months. Global
stocks surged after the G20 leaders pledged to maintain stimulus
measures.

Today's rally came on the back of higher turnover. The BSE clocked
a turnover of Rs 6,055 crore as compared with Rs 5,722.02 crore on
Friday, 4 September 2009. The market breadth indicating the overall
health of the market was strong. Realty, banking and metal stocks
were at the forefront of today's rally. The BSE FMCG index was the
lone loser among the sectoral indices on BSE. In stock-specific
activity Tata Motors surged almost 13%. ICICI Bank jumped around 7%
and Sterlite Industries gained around 6.5%