Four property advisory firms, including Colliers International, are in the fray to bag the mandate from Bank of Baroda (BoB) to advise the public sector lender on monetising its properties, valued Rs 4,800 crore.
A senior BoB executive said the resources generated through monetisation are expected to strengthen the capital adequacy of the public sector bank (PSB).
Other shortlisted firms are KPMG India, JLL Property Consultants and CBRE South Asia. BoB owns 268 properties, with a total value of at least Rs 4,800 crore. Various bank-owned properties are in the construction stage.
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The Reserve Bank of India (RBI) recently changed the rules for revaluing of assets. Revaluation of a bank’s property is to be part of common equity tier-1 (CET-1) capital, at a discount of 55 per cent. Earlier, this was treated as part of tier-2 capital. This helped banks to boost CET-1 capital by the end of March 2016.
According to BoB’s audited books for FY16, during the year, the bank revalued the premises forming part of its fixed assets schedule. These premises are revalued based on the reports of the bank’s approved valuers. The surplus arising from the revaluation amount of Rs 3,241.31 crore has been added to the “Revaluation Reserve” during the current year. This has boosted CET-1 capital of the bank for the year ended March. The capital-to-risk weighted assets ratio (CRAR, a measure of a bank’s capital) on a standalone basis (according to Basel-III norms) has improved to 13.17 per cent as on March 31, 2016, from 12.18 per cent on December 31, 2015. Of this, the Tie- 1 capital was 10.79 per cent and CET-1 capital was 10.29 per cent as on March 31, 2016. CRAR on a consolidated basis at the end of March 2016 was 13.63 per cent. Based on the existing position, the bank management has told the government it does not require additional subscription to equity capital. The central government holds 59.2 per cent stake in the lender.
The priority would be to generate capital through efficient use of assets and operations, over issuing fresh equity, BoB’s Managing Director and Chief Executive Officer P Jayakumar had said.
