Bank of Baroda has requested the government to offload 10 per cent of its current 66 per cent holding in the bank. The government had earned Rs 197 crore when it divested about 33 per cent of its stake in the bank last December.
Our fully paid shares are being quoted at around Rs 140. The earnings will be huge even if 10 per cent is offloaded now, BoB chairman and managing director K Kannan told Business Standard yesterday.
The bank has also sought government permission to issue infrastructure bonds with a tenure of 10 years, either in the domestic or overseas market. It has also suggested that Life Insurance Corporation and General Insurance Corporation could be asked to pick up 10 per cent of BoBs shares at either the prevailing market price or a slight discount. The two insurance companies could then release these shares into the market from time to time.
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LIC and GIC have enough surplus funds to invest in our shares, said Kannan. That is one option. Another option is to tap the market for global depository receipts. Bank stocks have been faring well in the stockmarket in recent times, even as the government has been steadily moving towards its avowed intention of reducing its holding in nationalised banks to 51 per cent.
If the government dilutes its holding in BoB by 10 per cent, its stake will drop to 56 per cent. The bank can later think in terms of a rights issue as well, said Kannan. The bank is under pressure from shareholders to announce a rights issue, he added.
There is room for us to raise Rs 500 crore as tier-II capital. This can be raised in the form of long-term infrastructure bonds in the overseas market at as low as 50 basis points above the Libor. We can also raise it at 12 per cent in the domestic market, he said.
The BoB chairman said he has also requested the governments approval for a proposal to issue tax-free infrastructure bonds.