Bank of India (BoI) will use the proceeds raised from its recently-concluded Rs 1,360-crore qualified institutional placement (QIP) to invest in new businesses such as insurance and mutual funds, and increase its presence in the overseas market. Besides, the bank is looking at acquiring a small to mid-size bank overseas. The Mumbai-based bank raised Rs 1,360 crore through QIP last week at Rs 360 per share. Despite the turbulence and volatility in the capital market, BoI shares got a fair pricing to its issue, said BoI chairman and managing director T S Narayanasami. The shares were oversubscribed by 1.87 times the issue size even as two mega issues, Wockhardt and Emaar, withdrew their initial public offerings.
The bank allotted shares to 35 investors, which included mutual fund, banks and insurance companies. The investors were all domestic institutions as the bank had decided to keep out foreign investors from the QIP. Following the issue, government stake is diluted by 5% to 64.4%.
The bank had set a price band of Rs 360 to Rs 370. We had received subscription at Rs 370 but we choose to fix the price at the lower end so that investors benefit from appreciation in the price, said Mr Narayanasami. Insurance companies were the biggest investors followed by banks and mutual funds in the QIP, in which 3.77 crore shares were offered.
Elaborating on the success of the issue at a time when some companies were reconsidering plans to tap the market, the CMD said the QIP route had been the most effective for raising resources since they have a better control over timing the issue. The bank decided on 1 February 2008 to tap the market on 4 February 2008 and we concluded it on 5 February 2008, he said.
On future plans, the CMD said now that the bank was armed with adequate capital, it was looking at venturing into new areas. The insurance company, for which it has a tie-up with Dai-ichi Insurance and Union Bank of India, will start operations next year. The insurance company will initially require Rs 120 crore of capital and Rs 200 crore over a period of time.
Also, the bank is in talks with foreign players regarding a joint venture for mutual fund business, he said. The bank will also offer wealth management services and get aggressive in the credit card business.
In this fiscal year, the bank has added Rs 2,747 crore to its capital which includes Rs 1,360 crore from the QIP, Rs 655 crore from perpetual issue and Rs 732 crore through revaluation of assets.
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