C.R. Sukumar

Hyderabad, March 17

CLOSE on the heels of raising Rs 300 crore through tier-II capital issue last month, Bank of India (BoI) is now on the verge of finalising its second public offer to further augment its capital to risk assets ratio.

The bank plans to offer Rs 125 crore capital to raise total funds of over Rs 1,500 crore including premium. "We plan to go in for second capital offering sometime during June-July. It could be either through domestic offer or issue of global depository receipts. We are currently evaluating the options and hope to finalise the offer route shortly," the BoI Chairman and Managing Director, Mr M. Venugopalan, told Business Line.

Following this, the Government's holding in BoI would come down to 51 per cent from 69 per cent, he said. The bank's capital adequacy ratio, which stood at 11.9 per cent at the end of December last year, has improved to 12 per cent after the recent tier-II bonds issue.

On the bank's consolidation plans through mergers and acquisitions, Mr Venugopalan said the domestic acquisitions had been put on backburner for the time being. BoI is currently negotiating with 3-4 banks based in Indonesia for possible acquisitions.

Stating that the cost of acquisition for a bank in such countries would work out cheaper compared to setting up of own branches, he said the cost of acquisition for an Indonesian bank would range up to $20 million. On replicating the model in other regions of the world, he said it could be tried in African countries as well.

As a part of its plans to consolidate its global operations, the bank has recently obtained approvals from the Reserve Bank of India to set up branches in Tanzania, Belgium, China and Vietnam and to open representative offices in Beijing and Doha. The bank is also pursuing plans to open branches and representative offices in West Asia.

"This helps us maintain the contribution of our overseas operations to the bank's overall volumes at 18-20 per cent," Mr Venugopalan said.

Following the recommendations of Boston Consulting Group appointed to suggest the roadmap, the bank has initiated measures to augment its product profitability by redesigning and repackaging products. The bank has also reoriented its focus on the small and medium enterprises (SME) segment. "We expect to complete the study on business process re-engineering, as suggested by the BCG, in the next three months," he said.

Confident of maintaining a compounded annual growth rate (CAGR) of 20 per cent at least for the next years, Mr Venugopalan said the bank expected to cross the Rs 2,00,000 crore mark in business volumes by 2007 from the existing level of Rs 1,31,000 crore. With a plan to attain zero per cent non-performing assets by 2007, the bank proposes to reduce its net NPAs to 2.8 per cent by the fiscal-end from the existing 3.8 per cent and to further reduce it to 1.25 per cent during the next fiscal.

(This article was published in the Business Line print edition dated March 18, 2005)
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