The Hindu Business Line : Bank of India seeks out new ventures with QIP issue proceeds

Mumbai, Feb. 10 After having scored a first with its Qualified Institutional Placement (QIP) issue, Bank of India (BoI) is looking to expand into allied businesses such as mutual funds and wealth management. The bank is also considering acquiring a small overseas bank if the price is reasonable, said Mr T.S. Narayanasami, Chairman and Managing Director. In January, the Finance Minister had asked nationalised banks to look into various options, including QIP, to raise tier-I capital to meet the Basel-II norms, which would be implemented from April for banks having overseas branches.

Syndicate Bank and UCO Bank are other public sector banks that might be considering raising capital through the QIP route instead of a follow-on public offer.

BoI, the first Indian public sector bank to raise money through the QIP route, has raised Rs 1,360 crore tier-I capital by issuing 3.78 crore shares at a price of Rs 360 per share.

Post-the issue, the capital adequacy ratio would be 13.85 per cent, which includes tier-I capital of 8.38 per cent. The net worth of the bank will be Rs 8,116 crore. The Government holding in the bank will come down from 69.47 per cent to 64.47 per cent.

The price band was Rs 360-370 and the issue was subscribed 1.87 times. Of the 35 investors, 15 per cent were mutual funds, 60 per cent were insurance companies and 25 per cent were banks.

More capital

Explaining why BoI took the QIP route to raise funds, Mr Narayanasami said it is less costly and faster than a follow-on public offer. Post the QIP issue, the bank now has the scope to issue 10.5 crore shares to foreign institutional investors (FIIs). The FII holding is currently at 17 per cent.

The capital raised through QIP allows BoI to raise up to an additional Rs 640 crore tier-I capital through preference shares and perpetual debt instruments and Rs 2,000 crore of tier-II capital.

Future prospects

“Now that we have additional funds, we can look for a subsidiary or joint ventures for mutual and wealth management, and also strengthen our credit card business. Maybe, we can also look at acquiring a small bank overseas,” Mr Narayanasami said.

BoI is on course to meet all business targets and will touch 25 per cent credit growth, as projected, this fiscal. Interest income would also grow at the current level of 26 per cent, he said.

The bank is looking to set up overseas offices in Cambodia, Glasgow, Dhaka, Tanzania, and Dubai.

“We look at places where Indian corporates are acquiring a unit and our presence can help,” Mr Narayanasami said.