IOB to float IPO despite higher NPAs, lower profits

IOB to float IPO despite higher NPAs, lower profits
ENS ECONOMIC BUREAU

MUMBAI, SEPT 13: A public sector bank which has reported higher sticky assets and lower profits 1999-2000 is coming out with an initial public offering (IPO). Indian Overseas Bank (IOB) which has run up non-performing assets (NPAs) of Rs 1,623 crore (as on March 31, 2000) has planned to hit the capital market with an IPO of 11.12 crore equity shares to raise Rs 111.20 crore.

Priced at par of Rs 10, the wholly-government owned bank's net profit has been slowly but steadily falling from Rs 113.06 crore in March 31, 1998 to Rs 55.34 crore in March 31, 1999 and to Rs 40.34 crore as on March 31, 2000.

Not only this, the bank's wholly owned subsidiary in Singapore IOB Properties Pte Ltd has incurred an accumulated loss of S$ 13.322 mn (Rs 33.82 crore). During the year 1996-97, it has adjusted an accumulated loss of Rs 1,000 crore by setting off the same with the paid-up capital as on March 31, 1996.

Painting a rosy picture on the bank's future plans, its chairman and managing director R V Shastri said the main objective of the issue is to augment the capital base of the Bank, which now stands at Rs 333.60 crore, and to meet the future capital adequacy requirements.

With this public offering, which opens on September 25 and closes on October 5, the government holding in the bank will come down to 75 per cent, implying that the public will be holding 25 per cent in the enhanced equity capital to Rs 444.80 crore.

The net advances as on March 31, 1999 stood at Rs 10,117 crore as against a net NPA of Rs 739 crore while in March 2000 the net advances were Rs 11,573 crore against a net NPA of Rs 885 crore. The bank deposits amounted to Rs 24,318 crore in March 2000, recording an increase of around Rs 10,000 crore since March 1996. In fact, the gross NPA has been going up from Rs 1,255 crore in March 1998 to Rs 1,441 crore in March 1999 and to Rs 1,623 crore in March 2000.

The market regulator Securities Exchange Board of India had instituted enquiry proceeding against the market intermediaries, including IOB, who were the post issue lead manager of Intereads Exports, New Delhi. The issue opened and closed in May 1995. There was an allegation that the bank was aware of late application submitted by the promoters and had accepted the same. It was further alleged that there were inconsistencies in the information report submitted to Sebi.

The bank has 1422 branches spread across the country and six abroad with a total staff strength of 28,213. Commenting on the proposed VRS scheme for the bank employees, Shastri "said the bank is still reading the fine-print of the government proposal and a decision will be taken by the board early December this year on the offer to be made by the bank and how to fund the proposal".

IOB has also plans to launch e-commerce and internet banking during the fiscal. The bank has identified recovery and profitability as its thrust areas and has projected a gross profit of Rs 250 crore for 2000-01.