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Bank of Baroda (BoB) is planning to bolster its capital base by raising up to ₹13,000 crore by December to support a 15 per cent business growth and maintain a capital adequacy ratio that is one per cent above the regulatory minimum.
BoB’s plan comes against the backdrop of Dena Bank and Vijaya Bank getting merged with the former with effect from April 1, to create India’s second-largest public sector bank.
BoB is considering raising Tier-I and Tier-II capital to the extent of ₹7,000 crore; up to ₹5,000 crore through a qualified institutional placement; and about ₹1,000 crore via an employee share purchase scheme (ESPS), said Papia Sengupta, Executive Director.
Notwithstanding the higher base of business, following the merger of Dena Bank and Vijaya Bank with BoB, the latter is eyeing a compounded annual growth rate of 15 per cent in business over the next five years.
Post merger, BoB’s total business stood at ₹15.66 lakh crore (deposits of ₹9.15 lakh crore and advances of ₹6.51 lakh crore).
“We will raise resources via ESPS by September. By December, we should be able to raise capital through other routes,” said Sengupta.
The bank is likely to offer shares to its 85,000 employees under an ESPS at a discount of 25 per cent, she added.
While it needs to keep minimum total capital plus capital conservation buffer of 11.50 per cent by March-end 2020, BoB, given its risk appetite and risk tolerance, will maintain a regulatory capital of at least 12.50 per cent, Sengupta elaborated.
In BoB’s annual report, PS Jayakumar, MD & CEO, had stated that the bank is confident about generating organic capital to meet the credit requirements of its customers.
Sengupta said:“Once the economy starts growing on the back of infrastructure spending and government spending, I think the overall growth story will become strong.”
BoB’s market share, following the merger, stood at 6.32 per cent and 6.07 per cent in deposits and advances respectively, as against a market share of 4.12 per cent and 4.06 per cent before the merger.
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