Reaching a high market capitalization of more than INR 50,000 crore, the Indian Overseas Bank (IOB) proudly stood as the second most-valued listed public sector bank (PSB). During the last month, the stocks of the state-owned lender rose to nearly 80 percent on the BSE.
Last Friday, the bank closed the trading with a market cap of Rs 51,887 crore. It crossed the other competitors Punjab National Bank (PNB) and Bank of Baroda (BOB). Accordingly, PNB closed its trading at a profit of Rs 46,356 crore, while BoB earned Rs 44,060 crore, putting them respectively third and fourth in PSBs. The stock price of PNB stood low with a 4% decline in the last month as BOB’s stocks increased by 5 percent, as against Sensex’s 1.2 percent rise.
With the bank’s move towards privatization, its stocks soared to Rs 29 on June 30, marking a record high in four years since May 2017. The central government offered Rs 4,800 crore in the Central Bank of India and Rs 4,100 crore in Indian Overseas Bank that will help the banks improve their valuation before the privatization.
The government offered the financial infusion of Rs 14,500 crore to the banks that needed to work on the financial standing as they were subject to RBI’s prompt corrective action framework (PCA).
Presently, the Indian Overseas Bank, Central Bank of India, and UCO Bank fall under the PCA framework, creating an obligation to them from further lending, management compensation, and directors’ fees.
Reports say that the two banks might have a 51 percent sale in the first phase of disinvestment. The government made ambitious plans for the development that included privatization in the Union Budget for 2021-22. It would be the broader divestment goal for FY22 of the government. The budget emphasized the privatization of many non-financial state-owned institutions and the listing of wholly-owned Life Insurance Corporation of India.
The net profit of IOB doubled to Rs 350 crore in the fourth quarter of 2021 that ended in March. It increased from a net profit of Rs 144 crore during the last year due to higher non-interest income. The growth is seen from the third quarter profits of Rs 213 crore.
The bank improved in assets with gross non-performing assets (NPAs) that declined to 11.69 percent of gross advances by the end of March, compared to 14.78 percent last year. Net NPAs dropped to 3.58 percent from 5.44 percent.
The bank aims for recovery, low-cost deposits, and less capital-consuming advances to come out of the Prompt Corrective Action (PCA) framework. According to the approved capital plan for FY22, the equity shares will be increased to 1.25 billion through a follow-on the public bid issue, which may or may not include government participation or qualified institutional buyers.