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Source: media reports

Central Bank initial offer subscribed five times

Central Bank initial offer subscribed five times
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First Published: Wed, Jul 25 2007. 01 03 AM IST
Updated: Wed, Jul 25 2007. 01 03 AM IST
Mumbai: Central Bank of India’s initial public offering of 80 million shares was subscribed 5.08 times on the first day. The shares of the face value of Rs10 each are being offered in the price band of Rs85-102.
According to the National Stock Exchange (NSE) website, the qualified instituitional buyers’ (QIB) portion—45.6 million shares—was subscribed 8.23 times with domestic institutional investors evincing more interest than their foreign counterparts.
In February, Chennai-based Indian Bank made an offering of 86 million shares in a price band of Rs77-91. The issue was subscribed 32 times. Since its listing on 1 March, the stock has risen 57% to close at Rs151.55 on the Bombay Stock Exchange (BSE) on Tuesday.
After a sharp rally since April this year, there is a slowdown in the momentum of banking stocks in recent weeks. The 18-stock Bankex, an index of the industry, has lagged behind the benchmark market index Sensex in the past three weeks.
Since 4 July, the Bankex has posted a return of 2% aga-inst 6% rise in Sensex during the period. The Bankex had risen 33% between April and 4 July against Sensex’s rise of 19%. On Tuesday, Bankex closed flat at 8,356.
“After the sharp rally since April, investors have booked profits in banking stocks as there has been nervousness ahead of the Reserve Bank of India’s quarterly review of monetary policy slated to be announced on 31 July,” said Sarika Purohit Lohra, a banking analyst with Angel Broking Ltd, a Mumbai based brokerage.
Hitesh Kuvelkar, an analyst with First Global Securities Ltd, another brokerage, points out that recent follow-on offerings from banks has led to dilution of return on equities for investors. “Also, the excess ownership of banking stocks among investors is one of reasons for underperformance of the banking stocks in recent times,” he says.
“Most of the top banks have reported pressure on margins in the first quarter. So investors are avoiding these stocks after the announcement of results” says Rajesh Malhani, senior research analyst with Prabhudas Lilladhar Pvt. Ltd.
However, analysts also say that recent underperformance of bank stocks could be a short term phenomenon. “As banks plan to bring down deposit rates, the margin pressures in the coming quarters should come down” says Malhani.
With Central Bank of India hitting the capital market, only two of the 19 nationalized banks remain wholly owned by the government. They are Kolkata-based United Bank of India and Delhi-based Punjab & Sind Bank.
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First Published: Wed, Jul 25 2007. 01 03 AM IST