Global Trust Bank has initiated talks with the Development Bank of Singapore and the Commonwealth Bank of Australia to sell a 49 per cent stake to them.
The bank has put on hold talks with Newbridge Capital owing to differences of opinion on the proposed writing down of capital. The talks with Newbridge have been "put on hold" and not called off.
Bank officials have also held talks with the Royal Bank of Scotland.
The Global Trust Bank management and JM Morgan Stanley, its adviser on capital restructuring, held a meeting last week with the Singapore-based merchant banking arm of Deutsche Bank on placing its equity with the Development Bank of Singapore.
"The merchant banker has proposed to bring in a strategic partner from Southeast Asia. A former CEO of a public sector bank, too, has been roped in by the Development Bank of Singapore for advising it on the deal," a source said.
Global Trust Bank Managing Director Sudhakar Gande said: "The bank is pursuing three options -- a financial adviser, a strategic investor and a rights issue. The discussions with various investors are moving in the right direction. We will complete the transaction in 46 weeks."
Asked whether the talks with Newbridge have been shelved, Gande declined to comment. He said, "Talks that have taken place with various investors in the recent past are progressing well."
The bank has been looking for a capital infusion of about Rs 550 crore (Rs 5.50 billion). It is likely to follow a combination of preferential placement and rights issue to restructure its capital.
The preferential allotment of 49 per cent equity in Global Trust Bank to a strategic investor at the current market price will generate around Rs 225 crore (Rs 2.25 billion). The rest may be raised via a 1:1 rights issue. If the government allows this, the bank may later place 74 per cent of its equity with an investor.
Global Trust Bank promoter and former chairman Ramesh Gelli said: "I am not aware of the present development, but as a promoter, I will fully support any capital recast taken up by the bank." Ramesh Gelli and associates hold 20.28 per cent of the bank's equity. Following the capital restructuring, this will come down to around 10 per cent.
The Development Bank of Singapore has one branch in Mumbai and is primarily present in the corporate and treasury businesses. Currently, a bank operating in India is not allowed to pick up more than 30 per cent in another bank.
The Development Bank of Singapore may decide to merge its branch with Global Trust Bank. If that happens, the deal will follow Centurion Bank's capital restructuring model, where Bank Muscat is merging its operations in Bangalore with Centurion.
Development Bank of Singapore head of group communications Catherine Ong in Singapore said, "We don't comment on market rumours." The bank's key markets are Singapore and Hong Kong. It is, however, planning to build a pan-Asian presence.
Global Trust Bank had earlier been in talks with the United States-based $20 billion Newbridge Capital. The Hong Kong-based AIF, in association with Warburg Pincus, had also shown interest in acquiring a stake in the bank. Newbridge Capital was looking at buying a 49 per cent stake, while the AIF-Warburg combine planned to pick up 25 per cent.
In September, the Global Trust Bank board constituted a special committee, comprising three directors of the bank, to evaluate various capital restructuring proposals.
The members of the committee are Gande and independent directors P Kotaiah and Dayanand Soma. The bank had made provisions of Rs 353.8 crore (Rs 3.54 billion) in 2002-03 to clean up its balance sheet. It posted a loss of Rs 272.7 crore (Rs 2.73 billion) last year. In the first quarter of 2003-04, it posted a net profit of Rs 4.6 crore (Rs 46 million).
