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Tuesday, March 29, 2011

Sampath poised for huge capital gain

UNION BANK IPO

By Jithendra Antonio

While the much hyped Union Bank ordinary voting shares are yet to be traded on the trading floor today, it is learnt that Sampath Bank is poised to earn a huge capital gain that could amount to Rs.800 million, disposing its 7.9 percent stake in Union Bank.

“We may sell it if we get an attractive price in the market”, a Sampath Bank official told Mirror Business on the grounds of anonymity.

As per a valuation by a stock broking company, Union Bank shares priced at Rs.25 are likely to be traded at Rs.40 levels in the first day of trading.

According to the official, Sampath holds 26 million shares of Union Bank of Colombo (UBC) of which only 838,127 shares were bought at Rs.25 while the rest were purchased at Rs.10 per share. Sampath Bank in its annual report for 2010 said the total cost for UBC’s equity investment was Rs.276 million.

As to date, Sampath stands as the second largest (7.9% stake) shareholder of UBC, followed by Vista Knowledge Pte Ltd. with a 19.4% stake (64.677 million ordinary shares) of UBC.

Few weeks back, Sampath Bank CEO had said they were looking forward to dispose its 7.9 percent stake in UBC, as the bank is not keen on having substantial stakes in other commercial banks.

Union Bank officials on the day of the IPO announcement had said, major shareholders of UBC will be bounded by the SEC’s ‘Lock In’ Rule that prevents private investors from dumping shares at high market prices. The SEC later in February revealed that the ‘Lock In Rule’ will be only applied from February 8 onwards.

Meanwhile, the Sampath official said the ‘lock In’ rule will not affect Sampath bank’s sale of UBC shares on Colombo’s trading floor, as Sampath infused capital to UBC before December 2010.

Union Bank is offering 15 million shares at Rs. 25 each in three categories—1.5 million shares for its employees, 2.25 million for customers that have maintained accounts for a minimum of 6 months as at 31 January 2011, and 11.25 million shares for other investors via its IPO.

source - www.dailymirror.lk