Chennai-headquartered Indian Overseas Bank (IOB) has decided to raise $500 million through a Medium Term Note (MTN) programme in the third quarter of the current financial year. MTN is a debt instrument with a 5-10 year maturity period.
Speaking to media persons on the sidelines of the launch of the bank’s 3,000th branch at Vaniankudi in Sivaganga district, recently, Chairman and Managing Director M. Narendra said the funds are required to support the bank’s international operations.
The bank has a presence in China, Vietnam, Thailand, Singapore, Hong Kong, Bangkok, Seoul, Dubai and Sri Lanka, with a total business turnover of Rs 30,000 crore. It also plans to reopen its foreign currency banking unit in Sri Lanka.
IOB raised a similar amount through MTN last year, too. According to Narendra, it was oversubscribed 10 times.
If IOB’s business continues to grow at 14 per cent, for its domestic operations it would require a capital of Rs 2,300 crore by the end of the year. IOB’s total business stands at around Rs 3.67-lakh crore. It plans to close the fiscal with a total business of around Rs 4.50-lakh crore.
The Union Government holds 73.8 per cent stake in the bank. Since the bank should ensure that the Government shall, at all times, hold not less than 51 per cent of the paid-up equity capital, . the bank has the option to raise around Rs 400 crore through other sources, a source explained.
Public sector IOB has sought shareholders’ nod to mobilise up to Rs 413 crore, through an issue of 41.3 crore shares of face value Rs 10 each, either as fresh equity, rights issue, preference shares or qualified institutional placement.
The bank’s existing equity share capital stands at Rs 924 crore. The proposed fresh capital will take the total paid-up share capital to Rs 1,337 crore, which will be well within the total authorised capital of Rs 3,000 crore.