Having raised Rs1,360 crore through qualified institutional placements (QIP), Bank of India (BoI) does not need to raise any capital for two years.
Will use issue proceeds mostly to fund domestic credit demand
MUMBAI: Having raised Rs1,360 crore through qualified institutional placements (QIP), Bank of India (BoI) does not need to raise any capital for two years, chairman and managing director, TS Narayanasami said on Saturday.
“This capital will give me headroom for raising additional Tier I capital and I can also raise the same amount of Tier II capital together with leveraging my internal business. It means we can add another Rs40,000-50,000 crore, which will be enough for the next two years,” Narayanasami said.
The state-owned bank on Saturday announced that it has divested 5% of the government stake in it by selling 3,77,72,600 shares. It raised Rs1,360 crore by selling the shares at Rs360 each, just above the stock’s close of Rs355 on Friday.
QIP is a private placement of equity shares only to certain qualified institutional buyers as defined by the Securities and Exchange Board of India.
BoI is the first public sector bank to use this relatively new form of raising money in India.
“We chose QIP because we could raise money in one-third of the time and at zero cost. We got a fair price, but if we had gone for a follow-on issue, with the market volatility, by the time we tap the market it may not be a fair price,” Narayanasami said.
The bank got the final go ahead from Sebi on February 1 and opened the issue on Monday. The issue closed the following day, subscribed 1.87 times with 35 companies showing interest.
“We were sceptical whether the government will heed our request but they did and thanks to that we finished it in record time,” he said.
Foreign investors were deliberately kept out and the issue was only to local mutual funds, insurance companies and banks were allowed to invest, he added.
Out of the total amount raised, mutual funds contributed 15%, insurance companies 60% and banks invested 25%.
Government stake in the bank now stands at 64.47%. However, the dilution means there is room for a further 1% of FII investment in the bank.
Narayanasami said the additional money will be used mostly to fund the domestic credit demand, though the bank is also looking to increase its footprint abroad.
“We are targeting countries where Indian companies are acquiring units and there is potential for growth. We have applied for a branch in Cambodia and upgrading subsidiaries in Johannesburg, Tanzania. We will also have a branch in Glasgow and we are also looking at Vietnam,” he said.
BoI is also looking at partners for wealth management and mutual fund business. The bank has already earmarked Rs 250 crore to invest in the insurance venture in the next five years.
r_joel@dnaindia.net
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