The board of directors of Indian Overseas Bank (IOB) has given its approval for a rights issue. The move comes close on the heels of postponing the plans to raise R800 crore through Tier-I perpetual bonds, reportedly due to unfavourable market conditions.
Now, with the board clearing the rights issue, the Chennai-based public sector lender will issue 20 crore equity shares of face value of R10 each at a premium to be decided on the basis of market conditions.
While the government holds 69.62% stake in the bank, LIC has 10.32% share, as of the quarter ended September 2012.
M Narendra, CMD, IOB, told FE, ?The board has taken an enabling resolution on the rights issue and, at this point of point of time, we don’t know how much the government would want to give us by subscribing to the issue. The bank would need R1,500 crore to augment the tier-I capital as per Basel III?.
On the perpetual bond issue, he said that since the government has indicated willingness for a rights issue the bank can wait on that. ?The approval for that has a one-year validity and we can hold an EGM to take a final call on that later,? he said.