Mumbai: One of India’s oldest state-owned commercial banks, Central Bank of India, has announced its plans to raise money through an initial public offering (IPO).
The bank plans to sell 80 million shares of Rs10 each. The price band for the issue, which opens for subscription on 24 July and closes on 27 July, has been fixed between Rs85 and Rs102 per equity share.
In a statement, Central Bank announced that the proceeds of the issue would be utilized to augment the capital base of the bank “to meet the future capital requirements arising out of the implementation of the Basel II standards and the growth in assets, primarily the loan and investment portfolio and for other general corporate purposes”.
The statement also said that the bank is focusing on three main areas: Corporate; retail and agriculture.
At least 60% of the shares to be sold will be allotted on a proportionate basis to qualified institutional buyers (QIBs), largely banks and other financial entities.
The bank has reserved 30% of the shares for retail investors.
Central Bank of India is the second public sector bank to tap the equity market in calendar 2007.
In February, South India- based Indian Bank made an offering of 86 million shares in a price band of Rs77-91. The issue was subscribed 32 times.
The Indian Bank stock was listed on 1 March and has since risen more than 66%. It closed at Rs151.75 on the Bombay Stock Exchange (BSE) onFriday.
Once Central Bank gets listed on the bourses, only two of the country’s 19 nationalized banks, Kolkata-based United Bank of India and the New Delhi-based Punjab & Sind Bank, will remain unlisted.
India has 28 public sector banks, including State Bank of India, its seven associate banks, Industrial Development Bank of India and the 19 nationalized banks.
Sarika Lohra, a banking analyst with Angel Broking Ltd, a domestic broking house, is optimistic about the appetite for banking IPOs. “Central Bank of India is very strong by its branch network and has done well in recent quarters, owing to a strong corporate clientele. Fee-based income from the distribution of mutual funds and insurance products to retail individuals has also contributed to its total income,” said Lohra.
She added that the share sale would only dilute the bank’s equity by 7-8%.
On Friday, Bankex—the banking index of BSE comprising 18 stocks—closed at 8,281.75, up 0.81% from its previous close.
The Bankex rose by 22.4 % in the quarter ended June compared with a 12.07% rise in the Sensex, the exchange’s benchmark 30-share index.