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Public-sector lender Central Bank of India has approached the government with a proposal for an offer for sale (OFS) instead of a fresh issue of equity through routes like qualified institutional placement (QIP) or a rights issue.
It has chosen to take the OFS route to avoid dilution of its equity capital base while increasing the public float of shares. The government has a little over 93 per cent in the Mumbai-based bank at the end of December 2023.
M V Rao, managing director and chief executive, said the bank was confident on this issue (OFS). “Otherwise, there is no point in diluting its (capital) base further where actually the capital position is very strong and liquidity is adequate,” Rao said.
Central Bank of India’s stock closed 2.95 per cent higher at Rs 56.21 per share on BSE.
The capital position will be adequate for credit growth that the bank is envisaging for the next year (FY25) without going to the market through rights or QIP, Rao said in an analysts' call after Q3FY23 results.
Its capital adequacy ratio stood at 14.74 per cent with a Common Equity Tier I (CET-1) of 12.17 per cent at the end of Q3FY24, up from 13.76 per cent with CET-1 of 11.92 per cent a year ago.
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“The public float in the market (of bank shares) has to improve. Instead of diluting equity first, we would like to see that the float in the market (of bank shares) has to improve. For that, this is one route (OFS) that we are exploring. So, there will not be any dilution of earnings per share and also see that the float in the market moves up,” he added.
In October 2017, the government outlined a recapitalisation package of Rs 2.11 trillion for public-sector banks over FY18 and FY19. Central Bank of India received Rs 5,158 crore in FY18 and Rs 6,592 crore in FY19, Rs 3,353 crore in FY20 and Rs 4,800 crore in FY21.
Thus, over the past few fiscal years, the government has infused Rs 19,903 crore into Central Bank of India, helping improve its capital ratios, according to rating agency CRISIL.
