The Centre will sell up to 3% stake in the state-run Indian Overseas Bank to raise about Rs 2,000 crore through an offer for sale (OFS) at a floor price of Rs 34/share on Wednesday-Thursday. “Offer for Sale in Indian Overseas Bank (IOB) opens tomorrow for Non-Retail investors. Retail investors can bid on Thursday. Government offers to disinvest 2% equity in the bank with an additional 1% as a green shoe option,” the department of investment and public asset management secretary said in a post on ‘X’.
The OFS in IOB is part of the government’s effort to make it compliant with the minimum public shareholding norm of 25%. Currently, the Centre holds 94.61% stake in IOB. In the first week of December, the Centre sold 6% stake in another state-run Bank of Maharashtra to raise about Rs 2,500 crore through an OFS at a floor price of Rs 54/share.
Frequent resets
The government has frequently reset a deadline for five PSBs — Central Bank of India, Indian Overseas Bank, Bank of Maharashtra, UCO Bank, and Punjab & Sind Bank — to meet the MPS norm. The high government holding in these banks is partly due to capital infusion by the government between FY17 and FY22 to help them tide over stress on their balance sheet due to the rise in non-performing assets (NPAs).
In addition to non-debt receipts
Minority stake sales in PSBs by the government would add to its non-tax and non-debt receipts of the Centre. PSBs in recent years have been using the QIP route to raise capital to dilute the government stake. Unlike in the central public sector enterprises (CPSEs), the Centre was not disinvesting minority stakes in PSBs to give them enough headroom to raise capital to meet their capital adequacy requirements to expand business without depending on the exchequer.