Money & Banking

PSBs mull IPO-financing-type facility for employees to participate in ESPS

K Ram Kumar Mumbai | Updated on January 10, 2019 Published on January 10, 2019

To ensure that their plan to raise money via employee share purchase scheme (ESPS) gets good response, public sector banks (PSBs) may come up with a facility for bankrolling each other’s ESPS.

This proposal, being examined by two Mumbai-based PSBs, comes in the backdrop of tepid response to United Bank of India’s ESPS, which was subscribed only 58 per cent in August 2018. The Kolkata-headquartered PSB managed to mop up ₹30.80 crore, against the targeted amount of ₹52.75 crore.

Allahabad Bank’s ESPS, in March 2018, was subscribed 88 per cent. It raised ₹236.41 crore, against the targeted amount of ₹269.70 crore.

Over the last six months or so, a host of PSBs, including Central Bank of India (to raise ₹200 crore), Bank of Baroda, Bank of India, Bank of Maharashtra and Corporation Bank (to issue up to 10 crore fresh equity shares each), Vijaya Bank and Punjab & Sind Bank (up to five crore fresh equity shares), Canara Bank (two crore fresh equity shares in first tranche), Indian Bank (up to ₹800 crore), Union Bank of India (up to ₹600 crore), Indian Overseas Bank (about ₹217 crore), Punjab National Bank (about ₹487 crore), Oriental Bank of Commerce (up to ₹250 crore), and Syndicate Bank (up to ₹500 crore) have announced plans to raise monies via ESPS.

Though bank managements will appeal to employees’ sense of belonging to the organisation to persuade them to subscribe to the ESPS, they may work out a facility on softer terms with peer banks to ensure that their share subscription sails through, said a senior PSB official.

Since a company/ bank cannot finance acquisition of its own shares by employees, the possibility of a financing facility on the lines of ‘IPO financing’ with other banks is being looked at, he added.

Published on January 10, 2019
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