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UTI Bank and GTB Merger Analysis

The document summarizes the failed merger between UTI Bank and Global Trust Bank (GTB) in 2001. It describes how the merger was announced in January 2001 at a stock swap ratio of 2.25:1. However, investigation later found evidence of price manipulation in GTB's stock leading up to the announcement, carried out with the help of Ketan Parekh. This caused UTI Bank to threaten pulling out of the merger. Ultimately, both banks withdrew from the merger in April 2001 after the price rigging was confirmed. The failed merger significantly hurt GTB's financials and reputation.

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Avanti Mulay
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284 views15 pages

UTI Bank and GTB Merger Analysis

The document summarizes the failed merger between UTI Bank and Global Trust Bank (GTB) in 2001. It describes how the merger was announced in January 2001 at a stock swap ratio of 2.25:1. However, investigation later found evidence of price manipulation in GTB's stock leading up to the announcement, carried out with the help of Ketan Parekh. This caused UTI Bank to threaten pulling out of the merger. Ultimately, both banks withdrew from the merger in April 2001 after the price rigging was confirmed. The failed merger significantly hurt GTB's financials and reputation.

Uploaded by

Avanti Mulay
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd

GTB- UTI BANK

MERGER STORY BY
AVANTI MULAY
VIDYA PATIL
INTRODUCTION
 THE UTI BANK LTD AND GTB TO MERGE
 UTI GLOBAL BANK, LARGEST PRIVATE SECTOR
BANK IN INDIA.
 NET WORTH OVER RS 930 CRORES .
 AGGREGATE OF COMBINED DEPOSITS ABOUT
RS 16000 CRORES.
 ADVANCES IN EXCESS OF 8000 CRORES.
 EXPECTED AGGREGATE NET PROFIT RS 161.24
CRORES
INTRODUCTION
 UTI TO BE THE LARGEST SHAREHOLDER IN
THE MERGED ENTITY.
GLOBAL TRUST BANK
 PUBLIC LTD COMPANY REGISTERED ON 29TH
SEPTEMBER 1993.
 REGISTERED OFFICE AT SECUNDERABAD.
 AUTHORIZED SHARE CAPITAL RS 650 CRORES.
 DIVISION OF SHARE CAPITAL IS INTO 65
CRORES OF EQUITY SHARE OF RS 10 EACH.
 PAID UP CAPITAL IS 121,35,90,000/-
 DIVIDED INTO 12,13,59,000/- OF EQUITY
SHARES OF RS 10 EACH.
UTI BANK LTD
 AXIS FORMED AS UTI & INCORPORATED IN
1994
 SET UP WITH A CAPITAL OF RS 115 CRORES
WITH SPONSORSHIP AND CONTRIBUTION FROM
* UTI RS 100 CRORES
* LIC 7.5 CRORES
* GIC AND ITS SUBSIDIARIES OF RS 1.5
CRORES.
 REGISTERED OFFICE AT AHEMDABAD.
SCHEME OF EVENTS
 ON 27TH JANUARY 2001 AMALGAMATION
APPROVED.
 SWAP RATIO WAS 2.25:1
 COUNTERS OF GTB AND UTI BANK AT BSE
WITNESSED HUGE VOLUMES AND SIZEABLE
RISE IN PRICES.
 SUDDEN SPURT IN VOLUMES.
 UTI BANK THREATENED TO PULL OUT OF THE
MERGER.
SCHEME OF EVENTS
 WITH THE CONTROVERSY SECOND VALUATION WAS
OPTED FOR.
 UTI CLAIMED FIRST VALUATION IMPROPER.
 PARTIES TO WAIT FOR THE SEBI REPORT ON PRICE
RIGGING.
 IN MARCH 2001 A SWAP RATIO OF 2:1 WAS
SUGGESTED BY DELLOITE & HUSKINS.
 ON 23RD MARCH UTI BANK SUBMITTED SECOND
VALUATION REPORT TO RBI.
SCHEME OF EVENTS
 PRELIMINARY INVESTIGATIONS BY SEBI
CONCLUDED THAT PRICE RIGGING TO BE
TRUE.
 IN EARLY APRIL UTI BANK AS WELL AS GTB
ANNOUNCED THEIR WITHDRAWAL FROM THE
MERGER SCHEME.
BEGINNING OF EVENTFUL NON-
EVENT
 ON 24TH JANUARY, 2001 MERGER
ANNOUNCED.
 GTB STOCK WAS LOCKED AT RS 93.95
 TRADING PATTERN OF GTB AND UTI BANK
STOCKS SHOWED A MARKED RISE ON BSE.
 GTB AND UTI BANK ATTRACTED MEAGRE
VOLUMES TILL FIRST WEEK OF JANUARY.
 TRADING VOLUMES PICKED UP ON GTB
COUNTER AT BSE AND FORTH FOLD AT NSE.
BEGINNING OF EVENTFUL NON-
EVENT
 THE PRICE OF THE STOCK OF GTB INCREASED
FROM RS 81 TO RS 94.
 SAME STORY OF UTI BANK SHARES.
 THE STOCK PRICE OF UTI BANK LTD
INCREASED FROM RS 45.75 TO RS 49.85.
 SBI CAPITAL MARKETS LIMITED- ADVISORS &
VALUATORS
SEBI PROBE
 ROLE OF KETAN PAREKH IN UNUSUAL PRICE
SPURT
 SUBSTANTIAL PURCHASES IN SCRIP DURING
OCTOBER TO DECEMBER 2000.
 PRIMA FACIE CASE OF MANIPULATION
 EVIDENCE OF PRICE MANIPULATION BY GTB
 PURCHASE BY PAREKH HUGE CHUNK OF GTB
STOCK IN NOV- DEC 2000
REASONS FOR FAILURE
 MANIPULATION & RIGGING OF SHARE PRICE
 MANIPULATION WITH THE HELP OF
MANAGEMENT TEAM
 GELLI CHARGED OF INSIDER TRADING.
EFFECTS OF FAILURE
 3 MONTH MORATORIUM ON GTB
 WITHDRAWAL LIMIT BY RBI OF RS 10,000 FOR
DEPOSITORS
 CHAOS IN PUBLIC
 197.9% INCREASE IN GTB’S NET LOSS
 ACCUMULATED LOSS FOR FINANCIAL YEAR
EXCEEDED THE CAPITAL RESERVES AND
SURPLUS BY RS 315.10 CRORES
EFFECTS OF FAILURE
 TOTAL INCOME FOR THE YEAR DIPPED TO
29.5% TO RS 515.25 CRORES.
CONCLUSION
 RIGGING OF SHARE PRICE RESULTED IN
FAILURE OF PROPOSED MERGER
 SEBI BECAME ALERT AND IMPOSED STRICT
REGULATIONS
 SUCCESSFUL MERGER WOULD HAVE RESULTED
IN LARGEST PRIVATE BANK IN INDIA

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