Bob Seeks Signal For Issue, Premium May Be Rs 75-90

ICICI Securities & Finance Company, Industrial Development Bank of India and SBI Caps are to lead-manage the Rs 850-Rs 1000-crore issue.

Bank of Baroda is one of the three nationalised banks that have been allowed to return a part of the government capital.

The other two banks are Canara Bank and Corporation Bank.

After returning Rs 380 crore to the government, the bank's equity base will come down below Rs 200 crore.

It has already slashed its equity base from Rs 740 crore to Rs 577 crore by shifting the World Bank contribution to equity to tier two capital.

The idea is to dilute the government stake to the extent of 66 per cent. Once the shares are listed, government can go in for further divestment to bring down its holding to 51 per cent, a source at the bank said.

 

The first nationalised bank to go public was the Oriental Bank of Commerce. State Bank of India also diluted the RBI stake by tapping the market in 1994.

Bank of Baroda, Canara Bank and Corporation Bank, along with Bank of India and Dena Bank, constitute the second lot of nationalised banks to tap the capital market.

Despite depressed market conditions, the banks are likely to come out with equity issues at the earliest, provided they are able to return the government capital. Bank of India and Dena Bank, however, do not fall under the category as the two were allowed to set off their accumulated losses against equity last year.

Both Dena Bank and Bank of India have moved the central bank with proposals to tap the market. We are awaiting the central bank's clearance. We will charge a small premium, Dena Bank CMD Ramesh Misra said.

Canara Bank has also sought clearance from the finance ministry and the Reserve Bank of India for its proposed public issue. With an equity base of Rs 484 crore, it is planning to dilute 15 per cent to 25 per cent of the government stake. The premium amount will vary between Rs 130 and Rs 190, depending on the quantum of dilution of the government stake.

However, none of the banks can tap the market unless it is able to return the capital to the government.

The total amount of capital to be returned to the government is Rs 757 crore. There are indications that the capital will be returned at par. However, there has been no official communication from the government to this effect, one banker said.