Govt approves Indian Bank FPO

The Union government has approved Indian Bank’s proposed follow-on public offer (FPO), through which the bank plans to raise Rs 1,500-1,600 crore. The FPO is expected in September. After the FPO, the government’s stake in the bank would decline from 80 per cent to 70 per cent.

Indian Bank Chairman and Managing Director T M Bhasin said, “We would file the draft red herring prospectus within two months and would try to come out with the FPO in September 2011. We would issue 61.4 million fresh shares, with face value of Rs 10 each.”

“We are yet to decide on the quantum. It would be based on the guidelines of the Securities and Exchange Board of India,” said Bhasin, adding the funds would augment Tier-1 capital, since Tier-II capital was more costly.

Basin had earlier said funds raised through the FPO, coupled with scaled-back profits, would give the bank Rs 3,000 crore as additional Tier-I capital and help increase its loan book by Rs 20,000-25,000 crore.

“The bank had the option of raising Rs 6,000 crore through Tier-II bonds, but since the bonds were too expensive, we decided to take the FPO route,” Bhasin said. The bank, which recorded business worth Rs 1.81 lakh crore as on March 31, plans to close the current financial year with total business of Rs 2.25 lakh crore.