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Monday, October 09, 2006

Barclays bids for 5% in DCB

British banking major Barclays Group seems to be on an investment overdrive. It is learnt to have bid tad less than 5% equity in the recently concluded Development Credit Bank’s, DCB initial public offering, IPO. Other institutions, which have put in significant bids, are Canara Bank, IDFC and Reliance Capital, reports The Economic Times.

The price band for the DCB IPO, which ended on October 6, was fixed at between Rs 22-26. The bank is making a fresh issue of 7.15 crore shares, which would help it raise Rs 157-185 crore (Rs 1.57-1.85 billion).

Canara Bank is said to be the biggest bidder in the IPO and has put in a bid of over Rs 100 crore (Rs 1 billion). IDFC and Reliance Capital have also bid for over Rs 100 crore. FIIs, which have also put in significant bids, include Sovereign Global and Sandstone Capital. Public sector banks have in the past couple of years put in major bids in bank issues. However, they normally exit post-listing. Sources said Barclays has put in a bid for 4.9% of the enlarged share capital of the bank. The group has bid through Barclays Capital Mauritius.

Though the investment size would be much smaller than other major bidders, this could be possibly for the first time that a foreign bank is looking at investment through an IPO. This would be the second investment by the group in a private sector bank. It had last year picked up a stake in UTI Bank and currently has a shareholding of 4.95%. This is likely to be a portfolio investment for the UK group.

The group has been slowly increasing its presence in India. Barclays had last month invested USD 380 million in AAA Global Ventures, and acquired a non-banking finance company Rank Investments and Credits for USD 7.5 million. The group would infuse fresh capital to increase its total investments in the NBFC to USD 50 million. It is currently awaiting regulatory approval.

It has recently started the global retail and commercial banking division in India. This is the division’s maiden launch in Asia. The new vertical will do high-end corporate banking, SME, trade finance, cash management, supply chain management asset-based finance like leasing and will also get into retail in due course. The group is looking at investing USD 70 million in ’06 and ’07 for its corporate banking venture in the country.

The DCB IPO has seen an over-subscription of 36 times. Qualified institutional buyers, QIBs, which were eligible for 50% of the IPO, have put in bids of 37.9 times, institutional investors including HNIs which were eligible for 15% have put in bids of 84 times and the retail portion saw an oversubscription of 15 times.

After the issue, Aga Khan Fund for Economic Development’s, AKFED stake in the bank will come down to 30.13% from 58.43%. The bank will not make any fresh equity allotment for the next six months.

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