Equity Capital To Be Returned By UCO Bank
After a long time, the government has agreed to return a part of equity capital in UCO 
bank. This returned equity capital will be converted into non-convertible preferences shares for 10 years.
The existing shareholder would definitely be benefited from this conversion, but the Govt. will be cost around Rs 900 crore at current market price. This conversion will lead to hike in the share price, and thus the move may be beneficial.
However, the bank’s ability to raise funds in long run may be affected if the present policy continues to be kept at 51 % for minimum government holding. The Govt. too will benefit from this move, as it is the largest shareholder.
The government may also be able to gain interest income at the rate of around 8% on the face value of Rs 300 crore, for the equity shares are converted into preference shares.
“The government will convert its 30 crore shares into preference shares. The conversion will be done at par while the bank's share is quoting at Rs 40.55 and had gone up to Rs 88.40 per share in January 2008,” reported CMD, UCO Bank, SK Goel.
The government is sure to see some loss coming its way, as presently its owing in the bank is less than 75%, but after there 30 crore shares would be converted into preference shares, the Govt. holdings will come down to 59.9%. Due to this, the bank is thinking to make a follow up on public offerings of shares also. The bank can maximum, only provide 9 crore shares to the public, since the Govt.’s holding should not go down below 51%.
However, the bank will see its earning going up to 33% per share, by converting equity shares into preference ones. The bank EPS for 2007-08 was Rs 5.16, and there should also be a rise in the share price of the bank. By March 2009, the bank is conceptualizing to make a follow up public offerings at around Rs 60 per share.
On Tuesday, the bank unveiled an innovative program related to pre-funded cheque. This will let the saving account holder to get cheques in denomination of Rs 1,000, Rs 5,000 and Rs 10,000, against the account in the savings account.
