BoI ventures into funding IPOs

In a bid to capitalise on the current surge in initial public offerings (IPOs), Bank of India (BoI) has ventured into funding subscriptions.

The bank joined the IPO band wagon on March 6 by offering 'Star IPO' in those cities where the bank has the office of depository participants (DP).

"So far we have received a very good response from the market but it is difficult to comment right now since we had launched the product only a week ago. But we are fully geared up to be in this business." said U K Saroff, Zonal Manager, Ahmedabad Zone, Bank of India.

The bank has already funded IPO subscriptions of ONGC, GAIL, Power Trading Corporation, Petronet LNG Ltd and others worth more than Rs 50 lakh in Ahmedabad and expects to complete the current financial year with funding of above Rs one crore.

Apart from Ahmedabad, the bank has started funding for IPOs in the cities of Kolkata, Chennai, Pune, Bangalore and Hyderabad amongst others. "We will not fund all the IPOs. The issues to be funded will be decided by the committee of general managers," said Saroff.

The customer needs to open a D-mat account and a savings account with the bank. All the applications are handled by the bank from the stage of application to the final allotment or refund.

"Probably BoI is the only public sector bank funding IPOs and our interest rates are very competitive as compared to the other banks funding IPOs. "Apart from our main branch, we are funding IPOs from five other branches located in the city at Ellis Bridge, Navrangpura, Panchvati and Maninagar," said a senior official of the bank.

The quantum of loan amount will only be announced by the bank based on the issue price. However the bank will not fund more than Rs 10 lakh per borrower and the bank will fund only 50 per cent of the issue or bid price.

The bank will fund the issue for a maximum period of 60 days from the date of opening of issue for each loan. In case of refund orders the repayment days may be earlier than 60 days, while in case of default the bank will exercise its rights as pledgee.

At present, the bank has fixed interest rate of 11.75 per cent, one per cent over its base prime lending rate and a processing charge of 0.1 per cent of the loan amount.