BOI to raise upto Rs 6, 000 cr via tier I, II capital bonds

Gets shareholders' nod for equity offer, debt capital offering

Public sector lender Bank of India (BoI) plans to raise up to Rs 6,000 crore in capital by issuing Tier-I and tier-II bonds. It also plans to float equity offering to shore up capital adequacy to support business growth.

Shareholders of the bank gave the nod for the capital-raising proposals — capital bonds and equity issue — at its annual general meeting on Monday held in the financial capital.

B P Sharma, BoI’s managing director and chief executive, said going forward the bank will take a call on raising capital, factoring in requirements and market conditions.

The bank is growing at steady pace for the past many years, he said, adding it proposed to raise funds via qualified institutional placement/follow-on public officer/private placement of equity shares, tier-I bonds, tier-II bonds and preference shares. The bank is raising funds to meet the growing requirement of funds for expanding the business by way of long-term resources. Its shareholders gave the nod to issue 260 million equity shares of Rs 10 each at a premium.

Going by the closing price of Rs 173 per share on Monday, if the bank issues equity shares now, it can raise Rs 4,500 crore.

Currently, the authorised capital of the bank is Rs 3,000 crore. The paid-up equity share capital of the bank as on March 31 was Rs 664.91 crore. At present, the shareholding of the government of India in BoI is Rs 428.36 crore which constitute 64.43 per cent of total paid-up capital of the bank.

The bank will raise equity capital in such a way that it wouldn’t dilute government holding in the bank below 51 per cent.  

During the last financial year (2014-15), the bank issued 22.64 million equity shares of Rs 10 each at a price of Rs 283.50 per share, amounting to Rs 642 crore.

In March 2015, it had issued 20 million equity shares to Life Insurance Corporation of India and 2.64 million equity shares to the New India Assurance Co Ltd. BoI’s net worth — capital plus reserves — increased to Rs 26,494 crore from Rs 24,543 crore during FY15.  

During the financial year, the public sector lender also issued Basel-III compliant perpetual Additional Tier-I bonds of Rs 2,500 crore with call option.

Commenting on the business environment, BoI in its annual report for FY15 said the banking sector is under stress since it is beset by asset quality troubles. The credit off-take is also muted with the latest data showing year-on-year growth in bank credit at 9.8 per cent.

For FY16, credit growth was expected to be around 12-13 per cent for the industry while growth in deposits was also expected to be in that range.

However, now that a government with a decisive mandate was in place and certain bold initiatives were underway, the economy should regain some lost momentum and banks should see improvement on the asset quality front, BoI said.