Public sector lender United Bank of India’s share sale to employees has failed to receive sufficient support and managed to garner just 61% subscription even after two extensions.

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In a regulatory filing on September 13, the bank said it has allotted 29.2 million new equity shares of face value of Rs 10 each at an issue price of Rs 10.55 per share under the employee share purchase scheme (ESPS). The Kolkata-headquartered bank was able to mop up Rs 30.8 crore against its target of Rs 50 crore, at a subscription rate of 61%.

Shares issued under the scheme are locked in for a year. The share price of the bank tanked over 39% from December 2017, when the sale was approved by the bank’s Board, to July when the pricing of ESPS was announced.

The issue price was fixed 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”, United Bank had said in its regulatory filing on July 25.

On Friday, the bank’s shares closed at Rs 11.45 each on BSE, 0.09% lower than the previous close.

Due to tepid response among its employees over ESPS, the deadline of the scheme was extended twice — on August 13 and August 20 - before it closed on August 31. The public sector bank (PSB) was looking to raise Rs 50.47 crore from 14,541 bank employees who cumulatively were offered 47.8 million of new equity shares.

The bank had offered around 20,000 shares each to its two whole-time directors (MD and CEO and executive director) who were to shell out Rs 2.11 lakh each to fully purchase it. While 55 general managers and deputy general managers were offered 10,000 shares each, 530 assistant general managers and chief managers were offered 7,500 shares, whereas the same for 2,986 senior managers and managers was 5,000 shares each.

Around 4,379 officers were offered 4,000 shares per head and 4,242 staff were to be issued 2,000 shares each. Around 2,347 sub-staff, which include housekeeper and full-time sanitary workers, were offered 1,000 shares each for Rs 10,550.

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In a first for public sector banks, in December 2017, the Boards of United Bank and Allahabad Bank had approved allotment of shares up to 50 million to their employees - from chief executives to peons, in line with the finance ministry’s in-principle approval to public sector lenders to offer stock options to its employees.

In December, United Bank’s shares were trading at Rs 17.4-18 per scrip and the bank was looking to raise around Rs 85 crore that time. Interestingly, the share price of the bank has dropped 39.2% year to date till July 30.

Meanwhile, Allahabad Bank went ahead with the share allotment in February, which was subscribed 87.6%.

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 Public Sector Banks. However, the largest union representing officers lobby had offered support to the scheme, saying it will allow employees to be a stakeholder in the bank as a “separate investor class”.

The government shareholding at the end of the scheme stood at 92.25% against 93.15% as of June, 2018.

According to a former senior executive of the bank, who did not wish to be identified, the bank’s share price is under constant pressure as it is struggling with resolutions over piling non-performing assets (NPAs) and is under the prompt corrective action.

“Employees apprehensions are not entirely misplaced as the scheme comes with a lock-in of one year,” the executive said, adding that the lack of confidence among employees, however, may pose a challenge for the bank’s further capital raising plans.

United Bank managing director and chief executive officer Pawan Bajaj had recently said in an event in Kolkata that the bank is looking for a capital infusion of around Rs 1,500 crore and will approach the central government for it.

“First, we will approach the Centre and then explore alternatives such as employee stock option plan (ESOP),” he said recently.

To check deteriorating asset quality and to bring down non-performing assets, the bank has allowed its corporate loan book to shrink by around Rs. 6,000 crore to Rs 26,000 crore till March 31 and was looking to cap its corporate loans to a single borrower at Rs 150 crore, Bajaj had said earlier.