Bharat Overseas IPO plan flounders

The Chennai-based Bharat Overseas Bank's (BhOB) plan for an initial public offer (IPO) seems to have come a cropper with the Reserve Bank of India (RBI) yet to clear the proposal. BhOB had moved the central bank six months ago with the plan.

The bank had earlier decided to get listed by October 2005. The bank last week again wrote a letter to the central bank urging that its application be cleared sooner, a banking source said.

Bharat Overseas was promoted by seven banks in 1973 to take over Indian Overseas Bank's (IOB) Bangkok branch, as the Thailand government decided against allowing government-owned foreign banks. IOB was the largest shareholder with a 30 per cent stake.

The other shareholders include ING Vysa Bank, Federal Bank and Bank of Rajasthan. As its capital adequacy ratio is over 14.95 per cent, BhOB can continue with its business of lending even if it does not tap the market.

However, in the absence of clarity over the regulator's stance, existing shareholders have been eyeing a larger stake.

A few of them want to sell their stakes, while others want to increase their holding. Unless the bank is listed, valuation will remains an issue among the promoters. "The RBI's silence is only adding to the confusion. The regulator must make its stance clear on the proposed IPO," said one of the board members of the bank.

Bharat Overseas plans to raise about Rs 100 crore to increase its net worth to Rs 300 crore from Rs 198.38 crore as on March 31, 2005. RBI has stipulated that all private banks should have equity capital of Rs 300 crore and till this level is achieved, these banks must have a minimum net worth of Rs 300 crore all the time.

The book value of the bank's Rs 100 face value shares is Rs 1,203 per share. The bank had deposits of Rs 2,749 crore and advances of Rs 1,651 crore as on March 31, 2005.