Bank of India looking to raise Rs 4,500 cr via equity issue in Q1FY24

Public sector lender Bank of India is looking to raise equity capital upto Rs 4,500 crore in the current quarter ending June 2023 (Q1FY24) to support business growth.

The bank's board of directors has given it the go-ahead to raise up to Rs 6,500 crore in FY24. There are two components to the capital raising plan. The first is the issue of tier-I capital with fresh equity, which could be in the form of a follow-on public offering, a qualified institutional placement (QIP) or a rights issue.

As part of this component, the Mumbai-based lender has also taken approval to issue additional tier-1 (AT1 bonds) of Rs 4,500 crore. The second component pertains to the issue of tier-II bonds up to Rs 2,000 crore. The bank may seek shareholders' approval for a proposal to raise capital.

Bank executives said the preference is to go for an equity offering in the early part of the year (April-June 2023) so that they can concentrate on the business in the rest of FY24. The decision would depend on market conditions. The equity offering will help bring the Centre's stake below 75 per cent from the current level of over 81 per cent at the end of March 2023.

The bank would look at AT1 bonds only if it is not able to raise equity due to factors like market conditions, the executives said.

The lender, which has over 5,000 branches across the country, had a capital adequacy ratio of 15.6 per cent, with common equity tier-1 (CET-1) capital of 12.77 per cent, including capital conservation buffer. Till December 31, it reported a robust credit growth of 16.08 per cent YoY.

The capital raising plan for FY24 does not factor in the impact of transition to the Expected Credit Loss (ECL) model. The CET1 level is healthy to absorb the impact of ECL transition, officials said.

The tier-II bond offering, depending on market conditions, would help replace bonds worth Rs 1,500 crore that are maturing this September.