New Delhi, Oct 12: BoB housing Finance Ltd, is planning an initial public offering early next year with a view to reducing Bank of Baroda's equity stake in the company to less than 50 per cent. Besides the Bank of Baroda, the National Housing Bank will also reduce its stake from the existing level of 33 per cent to 10 per cent. ``Once Bank of Baroda's equity is reduced below 50 per cent, we will cease to be a government company,'' said BoB Housing Finance managing director C H Palan.Pre-IPO, the housing finance company raised its authorised capital from Rs 20 crore to Rs 50 crore. In fact, its paid-up capital has recently been doubled to Rs 15 crore from Rs 7.60 crore. ``The initial public offering will be timed after March 2000 depending on the market condition, which will also determine the pricing of the issue,'' Palan said.
BoB housing which extends housing finance at the rate of 13.25 per cent per annum, has a capital adequacy ratio of 12.39 per cent. Although there is no pressure on the the capital adequacy ratio (CAR), Bank of Baroda is keen to disinvest from the company it promoted nine years ago and lower its stake below 50 per cent. Besides, the National Housing Bank is also bound by the Reserve Bank of India's guidelines to bring down its stake to 10 per cent.
With a revival in the housing sector, BoB Housing Finance has done business worth Rs 70 crore in the first-half ended September 30 against Rs 72 crore for the whole of the previous fiscal. ``We are aiming at 100 per cent growth in business this year and will be among the top-of-the line housing finance companies in the next two to three years,'' Palan said.
The bank has an all-India network of 34 branches; more centres will be added soon, including one each in Rajkot, Hyderabad and Raipur. ``We have a major presence in the south with branches in Coimbatore, Bangalore, Chennai and Visakhapatnam,'' Palan said. The The company's non-performing assets stand at 1.19 per cent. Housing finance companies have a choice between project finance and individual housing loans. While the former give a handsome rate of return, the attendant risks for non-performing assets (NPA) are quite high compared with individual loans for which the average NPA is about 1 per cent. In BoB Housing finance, the ratio of individual loans and project finance was 70 to 30 in March 1999. ``This will change to 85:15 in the current financial year.
From March 2000, individual loans will account for 90 per cent of total disbursements. We are happy with lower returns and a lower NPA,'' Palan added.
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.