BoI to use QIP funds for growth, M&A

Bank of India (BoI) plans to use the capital it recently raised through qualified institutional placement (QIP) for funding credit growth, new businesses such as insurance and asset management and acquiring a small bank overseas.

The Mumbai-based public sector bank was able to mop up Rs 1,360 crore by placing 3.77 crore shares, each of Rs 10 face value, at a premium of Rs 350 a share with 35 domestic institutional investors (banks, insurance companies and mutual funds) despite turbulent market conditions, its Chairman and Managing Director T S Naraynasami said.

On the use of issue proceeds, the BoI chief said the adequate capital base gave the bank confidence for future business.

The capital would be deployed for asset growth, new businesses such as the life insurance entity, a joint venture with Dai-Ichi Mutual Life Insurance and Union Bank of India, and mutual fund and credit card ventures. The business partner for mutual funds might be finalised in the next three months, he added.

The expansion of the equity base would also help raise additional debt capital (tier I and II). Including QIP, the bank could mobilise up to Rs 4,000 crore. These funds, supported by retained profits, could help generate Rs 40,000-50,000 crore in the next two years, he said.

The international business, which has 20 per cent share in the total business, is crucial as Indian companies expand abroad.

"The bank is on the lookout for an opportunity (for acquisition) and will be interested in a small overseas bank," said Naraynasami. It has already picked up a majority stake in a small bank in Indonesia.

The QIP received expression of interest 1.86 times the issue size. The bank kept the issue open for two days. The placement process closed on February 6.