BOI looks to cut govt stake with follow-on equity offer in FY23

Bank of India, which raised ~2,550 crore through a qualified institutional placement (QIP) in August, is considering a follow-on public issue next year to reduce the government’s holding to 75 per cent. The additional capital would also support growth in lending beyond March

2023.

With the mobilisation of the QIP money, the government’s stake in the public sector bank would reduce from about 90 per cent to 81 per cent. It is keen on bringing the holding down to 75 per cent, which the Securities and Exchange Board of India (Sebi) has been advising, the bank’s Managing Director and Chief Executive Officer Atanu Kumar Das told Business Standard.

The reduction is good for governance as it creates room for additional independent directors on the board.

The bank’s capital adequacy ratio (CAR) was 15.07 per cent as on June 30, which is higher than the statutory requirement of 10.88 per cent. Its stock closed 6.14 per cent lower at ~59.65 per share on BSE Sensex on Thursday.

Also, with CAR nearing 16 per cent after the QIP, the bank is ready to take exposure to corporates, with collateral cover, and regular payment records but lower rating (say BBB). While this gives the bank pricing power, such loans attract higher risk weights (150 per cent). The bank has enough capital base to absorb additional burden, Das said.

Overall advances fell 0.6 per cent till the middle of August, but for Bank of India it rose 0.55 per cent. However, on a year-on-year basis, advances grew 6.5 per cent for the industry and 2 per cent for BOI.

Das said the retail, agriculture and MSME (RAM) segment, which is growing at about 10 per cent, helped expand credit but will not provide critical mass. The corporate segment would add that critical mass.

It is keen on bringing the holding down to 75%, which Sebi has been advising, the bank’s MD and CEO Atanu Kumar Das said