IOB to raise $1 bn via medium term notes

Indian Overseas Bank (IOB) is planning to raise $1 billion (around Rs 4,600 crore) by way of medium term notes (MTN) in various tranches. The bank also said it would look at qualified institutional placement (QIP) and follow-on public offer (FPO) going forward, to augment its Tier-I capital.

M Narendra, chairman and managing director, IOB, said, “To increase the bank's asset size from the overseas operations, we will be raising MTN in different tranches”.

Nupur Mitra, executive director, IOB, said that, of the $1 billion, $500 million will be raised before March 31, 2011.

“The funds can be raised at an attractive rate of three per cent in the overseas markets, compared to around six to nine per cent in the domestic market,” she said.

At present, IOB's overseas asset size is around Rs 15,000 crore, which include Rs 5,000 crore of deposits and Rs 10,000 crore of credit.

“The growth mainly comes from External Commercial Borrowings (ECBs), funding for mergers and acquisitions by Indian companies,” she said.

The bank is also looking to convert its representative offices in Dubai and China to a full-fledged branches. The bank is also planning to open branches in African countries and other parts of West Asia.

IOB is also looking at increasing its Tier-I capital, and has approached the government for Rs 1,400 crore additional capital. “If this money is not coming, we will look at Qualified Institutional Placements (QIP), followed by a follow-on public offer (FPO),” a senior official of the bank said. The bank's CMD confirmed this but did not specify the quantum. Currently, the Government of India holds 61.23 per cent stake in the bank.