MUMBAI: State-run Bank of India (BoI) has deferred its Rs 3,000-crore capital raising plan via private placement, hoping to get optimal value for its equity shares in the later quarters as it improves the bank’s financials. The move comes amid the government’s decision to infuse Rs 2,257 crore capital into BoI.
According to Dinabandhu Mohapatra, managing director of BoI, the bank had postponed the Qualified Institutional Placement (QIP) as the government has decided to infuse Rs 2,257 crore capital support into the bank obviating the need for the capital immediately. BoI had last tapped the market in November last year to raise Rs 500 crore capital through AT-1 bonds.
He clarified that the decision to drop the QIP plan was not because of the Reserve Bank of India’s decision putting the bank under the Prompt Corrective Action (PCA). Speaking to a news agency, Mohapatra said the government’s additional capital was coming in at a time when BoI has seen positive developments with regard to resolution of stressed assets under NCLT.
Accordingly, the bank decided to wait for the actual infusion on the book and then go to the market for QIP, which could fetch way we will get more value for our shares, he said.
BoI came under RBI’s PCA framework in March 2017, mainly on account of its falling profitability as well as rising NPA position. Consequently, the bank’s common equity tier 1 came under pressure necessitating the need for capital infusion for the government.
The bank, however, expects to be out of RBI’s PCA radar considering the aggressive pace with which it is pursuing the bad loan recoveries and resolution. Meanwhile, the bank’s plan to raise capital through other sources, including selling non-core assets, is on track, said Mohapatra.
The bank has already floated an RFP for selling its entire 29 per cent stake in STCI Ltd, formerly known as Securities Trading Corporation of India, as part of sale of its non-core assets within this fiscal.