Why Indian Overseas Bank shares are trading higher today

Shares of Indian Overseas Bank rose 3% in early trade on Thursday as investors cheered the lender’s plan to raise funds via equities and debt. The board of the public sector bank at its meeting held on 15 June 2022 approved the capital plan for FY23, which includes raising up to ₹1,000 crore by issuing equity shares and another ₹1,000 crore by issuing bonds during the year.

“The board has considered and approved the issue of equity shares to a maximum extent of ₹1,000 crore with appropriate premium to the public, by way of Follow on Public Offer/Rights Issue with or without participation from GOI/issue of equity shares to Qualified Institutional Buyers/issue of Shares to Employees under SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 / issue of shares on preferential basis to L1C and other insurance companies/mutual funds/QIBs, after obtaining the approval of the shareholders,” Indian Overseas Bank says in a BSE filing on Wednesday.

Adding to it, the board also gave a nod to raise Tier II capital by issue of BASEL III Compliant Tier II bonds up to ₹1000 crore with or without applicable green shoe option, in one or more tranches on private placement by way of the public issue either domestically or overseas.

Boosted by the capital raise plan, Indian Overseas Bank shares opened higher at ₹17.05, in sync with the broader market, and rose as much as 3% to hit a high of ₹17.20 in opening deals, against the previous closing price of ₹16.70 apiece on the Bombay Stock Exchange (BSE). In the first hour of trade so far, as much as 0.84 lakh shares worth 14.18 crore changed hands over the counter as compared to the two-week average volume of 2.03 lakh stocks. The market capitalisation of the bank surged to ₹31,945 crore. In comparision, the BSE Sensex was trading 306 points higher at 52,847 levels.

The stock traded higher than its 5-day moving averages, but lower than 20-day, 50-day, 100-day, and 200-day averages. The stock has fallen 1.5% in a week and around 18% since the beginning of the calendar year 2022. In the last one year, the stock has given 18% negative returns to its shareholders.

The bank has closed the financial year 2022 with a net profit of ₹1,710 crore, up 106% from ₹831 crore in 2020-21, on account of good growth in deposits, advances, and CASA. The total income during the year dipped to ₹21,633 crore compared with ₹22,525 crore in the previous fiscal.

For the January-March quarter of 2022 (Q4 FY22), the net profit jumped 58% year-on-year to ₹552 crore, aided by lower provisioning for bad loans. The operating profit dropped 6% to ₹1,614 crore, from ₹1,724 crore during the fourth quarter of 2020-21. The lender's asset quality improved with the gross non-performing assets (GNPA) ratio declining to 9.82% against 11.69% as of March 2021. The provisions for bad loans and contingencies for the quarter under review dipped to ₹1,014 crore, as against ₹1,380 crore in the year-ago period.