United Bank of India share sale virtually gets snubbed by employees

Public sector lender United Bank of India is getting a cold response for its ongoing Employee Share Purchase Scheme despite extending the deadline twice, as employees are concerned over the declining share price.

According to a bank employee, who wish not to be quoted, subscription worth around Rs 15 crore was recorded till August 20 against a target of raising up to Rs 50 crore at an issue price of Rs 10.55 per share. It is just 30% of the targeted mop-up. The bank has 14,541 employees, according to its annual report for 2017-18.

In a first for public sector banks, in December 2017, Boards of United Bank and Allahabad Bank had approved allotment of shares up to 50 million to their employees – from chief executives to peons. The decision was opposed by a section of officers' and workers' unions, as they argued it will lead to dilution of government stake in the two PSBs.

In December, UBI's shares were trading at Rs 17.4-18 per scrip and the bank was looking to raise around Rs 85 crore that time. Allahabad Bank went ahead with the share allotment in February, which was subscribed 87.6%. United Bank went slow on the scheme and has floated around 47.8 million shares. It opened the issue on July 30, 2018 for subscription. Interestingly, the share price of the bank has dropped 39.2% year to date till July 30, and 28.18% since February.

On July 25, in a regulatory filing, the Kolkata-headquartered bank said the issue was fixed at an issue price at a discount of 5% on "the average of the weekly high and low of the closing prices of equity shares" of the bank "during the two weeks preceding the date of offer". The earlier deadline of the scheme was August 13, which was extended to August 20 and now to August 31.

Another employee, who too did not wish to be quoted, said there are "some pressure at the ground level for participation" and mostly officers have subscribed so far. The subscription is a little below 50% till Tuesday, the employee said.

A former senior executive of the bank said employees' apprehensions are not entirely misplaced at a time when the bank is under the prompt corrective action and struggling with resolutions over piling non-performing assets, putting its share price under constant pressure.

The scheme, however, has found support from All India Banks' Officers Confederation, the largest officers' union. According to an official, the scheme allows employees to be a stakeholder in the bank as a separate investor class.
Under the scheme, shares to be allotted are to be locked in for one year.

According to an employee quoted above, the bank will offer around 20,000 shares each to its managing director and CEO Pawan Bajaj and executive director, who will have to pay around Rs 2.1 lakh, if they choose to fully subscribe to the issue.

The general managers and deputy general managers will be offered 10,000 shares each for Rs 1.05 lakh each to fully purchase the shares on offer. Assistant general managers and chief managers will be offered to purchase 7,500 shares and the subsequent scales below will be offered 5,000 and 4,000 shares each. The clerical staff is being offered 2,000 shares each while for the sub-staff, the number of shares to be allotted is 1,000, which means the cleaning staffer has to pay up to Rs 10,550 if he has to fully purchase it.
The managing director could not be reached for his comments.

In the June quarter, United Bank widened its net loss to Rs388.68 crore against Rs 211.46 crore in the year-ago period. Gross NPA increased to 22.73% in the first quarter of the current fiscal from 17.17% a year-ago. Net NPA increased to 15.17% in the June quarter from 11.10% in the corresponding period last fiscal.

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The government shareholding in the bank as on 30 June was 93.15%. As per Securities and Exchange Board of India norms, all public sector undertakings were mandated to bring down government shareholding to 75% by August 21.

Source: DNA Money