Our Bureau

Chennai, Feb. 7

INDIAN Overseas Bank (IOB) plans to buy out the stake held by six other banks in Bharat Overseas Bank.

IOB has called for a meeting of its board of directors on February 14 to consider a proposal to buy other shareholders of Bharat Overseas Bank, it informed the stock exchanges on Tuesday.

IOB has a 30 per cent stake in Bharat Overseas Bank. The other stakeholders are: Bank of Rajasthan (16 per cent), Vysya Bank (14.66 per cent), Federal Bank (10.67 per cent), Karur Vysya Bank (10 per cent), South Indian Bank (10 per cent) and Karnataka Bank (8.67 per cent).

According to reliable banking industry sources, IOB's move is a result of the Finance Ministry's recommendation for a consolidation in the Indian banking industry. Earlier, Bharat Overseas Bank had proposed an initial public offering, which would help it raise funds for business expansion and also to help some of the stakeholders dilute their stake in the bank.

Last month, the seven shareholders of Bharat Overseas Bank held a meeting in Chennai in which the possibility of IOB being the largest shareholder of Bharat Overseas Bank, acquiring the bank was considered.

Bharat Overseas Bank was established in 1973 to take over IOB's Bangkok branch. It now has close to 95 branches in the country besides the branch in Bangkok.

According to information available on Bharat Overseas Bank's Web site, the bank had a total income of Rs 238 crore on which it reported a net profit of Rs 20.05 crore for 2004-05. Its total business was of the order of Rs 4,429 crore, which it hoped to increase to Rs 12,000 crore by 2010.

The Web site says that as on March 31, 2005, the bank's book value was Rs 1,203 a share (of Rs 100 face value). Its capital adequacy ratio was 14.95 per cent.

Synergy:

According to reliable sources, IOB's acquisition of Bharat Overseas Bank will give it a lot of synergy, in terms of the branch network in the country and also the lone overseas branch. IOB has branches in Singapore, Hong Kong, Sri Lanka and a representative office in Malaysia. It has applied to the Reserve Bank of India to open a branch in New Zealand and a representative office in Vietnam.

This acquisition will give IOB a larger presence in the East Asian region thus help increasing its overseas business, according to the sources.

IOB's shares closed at Rs 105.50 on Tuesday on the National Stock Exchange, against yesterday's close of Rs 103.90.

Related Stories:
Restriction on holding stakes in other banks IOB seeks exemption from RBI norm
Bharat Overseas IPO soon
IOB yet to decide on trimming BhOB stake

(This article was published in the Business Line print edition dated February 8, 2006)
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