BoB gets nod for second float

Bank of Baroda (BoB) has received the government's approval for its second public issue even as another big public sector bank "" Punjab National Bank (PNB) "" is set to hit the market with its second public issue on March 7.

BoB will sell 7.1 crore shares. "The bank will sell shares with a face value of Rs 10 at a premium that will be decided later," said BoB in a stock exchange notice.

In September 2004, the bank had said it would issue 9.1 crore equity shares to raise around Rs 1,500 crore.

BoB's share price rose marginally today by 0.81 per cent on the Bombay Stock Exchange (BSE) to end the day at Rs 210.50. At this price, the bank would end up raising the amount it desires "" Rs 1,500 crore.

Following the public issue, the government's stake in the bank will come down to 53.8 per cent from 66.87 per cent. Unlike in the case of PNB, where the government has worked out a novel mechanism to earn a premium on its holding, BoB will not return part of the government's stake.

The issue will be through book building process but the timing of it is yet to be decided by the board. "We will decide depending on the market conditions," said a senior official at BoB. The bank is yet to finalise its merchant bankers.

With the funds BoB wants to get ready for meeting the Basel II norms for operational and market risks, and business expansion.

Bank of Baroda (BoB) posted a 77 per cent drop in net profit to Rs 69.50 crore for the third quarter ended December 31, 2004 compared to Rs 306.95 crore in the corresponding period of the previous year.

For the nine months ended December 31, 2004, the bank posted a 29 per cent drop in net profit to Rs 575.80 crore (Rs 810.98 crore).

In the third quarter, the bank's operating profit dropped by 18.7 per cent to Rs 520.53 crore (Rs 640.17 crore). For the nine months period too the operating profit was down by 6.8 per cent to Rs 1,666.93 crore (Rs 1,789.4 crore).

In January, Dena Bank raised Rs 216 crore at Rs 27 per share through its second public issue.

Other banks that have lined up their second public issues include Oriental Bank of Commerce, Bank of India, Allahabad Bank and Syndicate Bank.

All banks are raising funds in anticipation of the increased capital requirements prescribed by Basel II norms that are to be complied with by December 2006. Increased credit offtake is also another reason.