Over the last couple of months, one particular hedge fund, The Childrent Investment (TCI) Fund is accumulating shares of Public Sector Bank in huge quantities. TCI has been buying aggressively in the counters of Punjab National Bank, Indian Overseas Bank and Vijaya Bank . It is believed that they have invested more than Rs5000 crores in these bank stocks put together accumulating stakes ranging from 2% to 5% in each of the banks.
What is so interesting is the fact that TCI is considered to be one of the most active investor funds. They have instrumental in various corporate shake-ups over the last couple of years across the world. TCI was responsible for stopping the Deutsche Bourse's bid for London Stock Exchange resulting in the Chairman and CEO of Deutsche Bourse resigning over a period of time. Click here to read about this.
TCI has also been responsible for the sale of ABN AMRO Bank in 2007. It was one of the first funds which sent out a letter to the Managing Board of ABN Amro Bank to find out avenues to increase share holders returns by splitting the company or selling of the assets. This eventually resulted in the sale of ABN Amro Bank to Royal Bank of Scotland led consortium. Click here to read about this.
TCI is also involved in a debate with Japanese Government in trying to raise its stake to 20% from the present holding of 9% in Japan's Power Utility major, JPower. TCI wanted the dividends to shareholders to be increased by JPower but opposed by the management. Then TCI approached the Japanese government requesting for approval to raise its stake to 20% in JPower so that it can influence major board decisions. Two days back Japanese government has rejected the TCI request citing the reason that TCI looks for short term profits ahead of the common good to the public. Click here to read the story.
Now with a very noticeable history of active investing across industries and countries, TCI is upping their stake in various public sector banks in India. We guess TCI sees a possibility of using its stake in PSU banks to push forward the agenda of mergers in the Indian Banking sphere. Interesting space to watch out for!!
3 comments:
While I do appreciate the acheivements of TCI in other countries Iam sceptical about the success fo thier agenda in trying to push for more reforms in PSU banks.Knowing very well the heavily unionised PSus with 51 % cap on Govt stake , and the strong opposition from Left parties, it will be really interesting to see how TCI will acheive what they have in their agenda.
However in spite of all these obstacles, if they still acheive something tangible to further deepen the financial sector reforems, it will be path breaking.
Sridhar Santhanam
Hi Venkat,
Interesting post. In spite of large purchases by TCI, PSU Bank stocks have tanked since April. That shows you the knee jerk reaction of our investors towards news like inflation, interest rates etc. Foreigners look for longer term value and this they are finding in PSU Banks. The same story played out in 2003, when FII' loaded up on stocks and locals got in long after. Even on Friday despite the 400 pt fall in sensex, PSU banks did not fall much, perhaps indicating that they have bottomed out.
Hi Mahendra,
Thats right. Locals follow the FII's when it comes to making to entry in stocks.
PSU Bank stocks have gone up over the last 4 days ranging from 10-20%. ET has also reported TCI Fund buying in one of their front page articles.
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