Indian Overseas Bank (IOB) is planning to raise $500 million by issuing bonds to overseas investors in a month’s time.
M Narendra, Chairman and Managing Director of the Chennai-headquartered public sector bank, said the pricing of his bank’s overseas bond issue will be near that of State Bank of India’s recent bond offering.
SBI had mopped up $1.25 billion on July 25 through an issue of five-year senior unsecured bonds at 4.125 per cent.
The IOB chief said the last time his bank had tapped the overseas market it could raise $500 million at a pricing of Libor (London Inter-Bank Offered Rate) plus 232 basis points.
According to A.D.M. Chavali, Executive Director, IOB, the proceeds of the bond issue will be utilised predominantly to support Indian corporates’ overseas funding requirements. The resources will also bolster the lending capability of the bank’s overseas branches.
QIP plans
To support its 18 per cent credit growth target, IOB plans to raise Rs 1,500 crore in FY13. Narendra said the bank will either tap the qualified institutional placement (QIP) route or issue preference shares.
As the Government has a majority stake of 69.62 per cent stake in the bank, there is headroom for stake dilution. Life Insurance Corporation of India holds 10.33 per cent stake in the bank.
The IOB chief said QIP is the easiest way to tap the foreign institutional investors, who currently hold only 3.15 per cent stake.
The bank will come up with an equity offering if its share price goes up to the price when it last issued shares, that is, at Rs 92 per share.
IOB’s shares closed at Rs 73.40 per share on Wednesday on the BSE, up 1.17 per cent over the previous close.
In the April-June period, the bank reported a 13.55 per cent increase in net profit at Rs 233.44 crore as compared with Rs 205.58 crore in the year-ago period.