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Four banks poised for flotations

New Delhi, Oct. 22: North Block will allow four state-run banks — Canara Bank, Bank of India (BoI), Central Bank and Indian Bank — to tap the market.

Finance ministry sources said while the two unlisted banks — Indian Bank and Central Bank — will make initial public offerings (IPOs) early next year, Canara Bank and BoI will make follow-on public offers to increase their capital to risk assets ratio.

Indian Bank is likely to issue 8.9 crore shares in January to raise between Rs 800 crore and Rs 1,200 crore to increase its capital base. The bank will dilute the government’s stake by 25 per cent through the proposed IPO. After the issue, its capital adequacy ratio (CAR) will move up from 11 per cent to 15 per cent.

The bank is in the process of selecting merchant bankers for its IPO. Banks, which need to comply with Basel II norms by March 2007, have been asked by the government to meet increased capital requirements through IPOs and bond issues.

Central Bank of India officials said the bank is considering an issue of subordinated debt of around Rs 700 crore under tier-II capital as it is keen on recording a 30 per cent growth.

The tier-II issue could be completed before December-end and improve the capital adequacy to at least 11.3 per cent, officials added.

For its follow-up offer, Canara Bank officials said the bank would raise Rs 1,380 crore from the international market during the current quarter.

The bank has already raised Rs 1,075 crore from the domestic market. Officials said the bank is raising resources in excess of Rs 3,000 crore through upper tier II and hybrid tier I bonds to maintain capital adequacy above 12 per cent, fund expansion, diversify operations and comply with Basel II norms.

BoI is also on the verge of finalising its second public offer. The bank plans to offer Rs 125 crore capital to raise total funds of over Rs 1,500 crore, including premium.

“We plan to go in for a second capital offering sometime during June-July 2007. It could be either through a domestic offer or issue of global depository receipts,” bank officials said.

The bank is evaluating the options and will finalise the offer route soon.

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