IOB to use MTNs to aid overseas operations

Indian Overseas Bank (IOB) would increase the asset size of its overseas operations by raising medium-term notes (MTN) in different tranches, according to its CMD M Narendra.

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

“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,” said the bank’s executive director Nupur Mitra.

The primary objective of the MTN programme is to raise foreign currency funds for funding the long-term assets of its overseas branches.

The bank's annual report lists the key milestones in the MTN programme as obtaining second rating from Fitch, listing the issue on the Singapore Stock Exchange, and finanlising extensive documentation, among others.

The first tranche of the issue under the programme was launched on April 12 for an issue size of $ 500 million in the form of senior unsecured debt for a tenor of 5.5 years. The pricing was concluded at a price of 290 basis points above the five-year treasure rate and the issue was oversubscribed to the extent of $1.9 million.

“The growth mainly comes from external commercial borrowings (ECBs) and funding for mergers and acquisitions by Indian companies,” Mitra said. As part of augmenting capital, IOB plans to go for a rights issue, preferential issue, qualified institutional issue or on a private placement basis.

The bank would seek shareholders’ approval at the AGM scheduled next week, Narendra said.

The bank would issue up to 18.03 crore shares in the process, while the current total number of shares outstanding is 62 crore shares. The government currently owns 65.87 per cent of the bank. With the proposed fund-raising plan the bank could dilute up to a 14.87 per cent stake.