Indian Overseas Bank to raise Rs1,000 crore via QIP, looks to hire investment bankers

Mumbai: State-owned Indian Overseas Bank (IOB) intends to raise around Rs1,000 crore by selling shares to institutions and is looking to hire merchant bankers for the process.

“The bank intends to initiate the work relating to appointment of book running lead manager and other intermediaries to prepare the requisite documents and to undertake various activities in relation to the qualified institutional placement (QIP),” a tender on the bank’s website read.

The last date for submission of bids is 23 February.

IOB said the amount to be raised is indicative and the issue size may vary, based on the bank’s discretion.

R. Subramaniakumar, managing director and chief executive at IOB, told Mint the timing of the QIP is not decided as yet.

“After empanelling bankers, we will test the market appetite and then take a call. Recently, we got capital from the government, which will help us improve our capital adequacy ratio as well as for growth. Since our turnaround strategy, which involves higher recoveries from bad loans and focus on retail and MSME (micro, small and medium enterprises) loans, is working well, the QIP proceeds will further help us strengthen balance sheet,” he said.

Chennai-based IOB has been allocated Rs4,694 crore under the government’s Rs88,000 crore of recapitalization programme for public sector banks.

It is among 11 lenders which are under the Reserve Bank of India’s prompt corrective action (PCA). PCA forces banks to step up recoveries of bad loans, reduce risky loans, strengthen capital base and restrict branch expansion, among other measures, in order to improve balance-sheet health.

According to analysts, capital infusion has improved the ability of state-owned banks to tap the market for fund raising.

“The chunk of the government capital is expected to go towards meeting regulatory requirements including that for provisioning against bad loans. For stronger balance sheet growth, banks need to raise capital from the market,” said Alpesh Mehta, deputy head of research at Motilal Oswal Securities.livemint