IOB, Punjab & Sind Bank, Central Bank gear up for share sales to reduce govt stakes

Indian Overseas Bank, Punjab & Sind Bank and Central Bank of India are working on share sales which will help the state-run lenders reduce the government ownership in compliance with Sebi's mandate, officials have said.

IOB has indicated a tentative timeline for its proposed qualified institutional placement (QIP), while Punjab & Sind Bank and Central Bank of India are yet to finalise the same, they said.

The Indian Overseas Bank (IOB) has received approval to raise up to Rs 5,000 crore through a qualified institutional placement (QIP) in the current financial year and has secured almost all the necessary clearances, Ajay Kumar Srivastava, managing director and chief executive officer of the bank, told PTI.

The lender is looking to launch the issue towards the end of the current quarter or at the beginning of the fourth quarter, depending on market conditions, he added.

If IOB raises the entire ₹5,000 crore, the equity dilution is expected to be around 6%, bringing the government's shareholding in the Chennai-headquartered bank down to approximately 86 per cent from the existing 92.44%, Srivastava said.

Punjab & Sind Bank is also evaluating a capital-raising opportunity through the QIP route. The lender has obtained the requisite approvals, appointed merchant bankers and held discussions with potential investors, as per people in the know.

During an investor interaction after the Q2 results, the Punjab & Sind Bank managing director and chief executive officer, Swarup Kumar Saha, said it was exploring various avenues to raise capital, with a QIP being the preferred route. The timing of the proposed issue would depend on market conditions and feedback from its merchant bankers.

Central Bank of India is another public sector lender looking at equity capital mobilisation. The bank has received shareholder approval to raise up to ₹7,000 crore through various routes, including QIP, follow-on public offer and rights issue in July.

The lender is also considering reducing the government's shareholding as part of its capital-raising strategy. However, the route and timing of the proposed fund mobilisation will depend on the bank's assessment of market conditions.

A QIP enables banks to raise fresh capital by issuing new shares to institutional investors. This increases public shareholding and reduces the government's ownership stake through dilution.

The proposed issuances come at a time when public sector banks are looking to strengthen their capital base, support business growth and gradually bring down government ownership.

Under the Securities and Exchange Board of India's minimum public shareholding norms, listed companies are required to maintain at least 25 per cent public shareholding. Fresh equity issuances could help state-owned lenders increase their public float while providing them with additional capital.

With regulatory approvals and preparatory steps already in place at some lenders, the second half of FY27 could see increased fundraising activity by public sector banks, subject to favourable market conditions and investor demand.