Indian Overseas Bank's maiden issue at par

By Our Corporate Reporter

CHENNAI, SEPT. 3. With a corporate mission of making itself a strong, competitive, customer-centric organisation and taking full advantage of the technological advancements in building business volumes and diversification of customer profiles, Indian Overseas Bank, one of the major nationalised banks, is entering the capital market for the first time with 11.12 crore equity shares of Rs. 10 each at par aggregating Rs. 111.20 crores. The issue opens on September 25.

Addressing presspersons on Thursday, Mr. R. V. Shastri, Chairman and Managing Director, said the issue was being made at an attractive price to investors. After the public issue, the Government's stake in the bank would come down to 75 per cent.

The object of the issue is to raise the capital base to meet future capital adequacy requirements, augment long term resources and get the equity shares listed on the stock exchanges, he said.

Founded in 1937, the bank has grown in stature and by 1969, it was transacting a business of Rs. 146 crores through 213 branches. The volume of business has since improved further with 1,422 branches now in India and six abroad. The bank has sponsored three regional rural banks and all the three are covered by the restructuring programme of the Government.

Deposits at the end of March 31, 2000, stood at Rs. 24,318 crores while advances were Rs. 11,573 crores. Priority sector advances stood at Rs. 3,675 crores constituting 44.86 per cent of net credit as against the stipulated RBI norm of 40 per cent.

Export credit accounted for Rs. 988.23 crores, constituting 9.29 per cent of net credit.

The bank reported a net profit of Rs. 40.34 crores against Rs. 55.34 crores in the previous year. The decline in profit is largely due to requirements of higher provisions for non- performing assets, contingent provision for standard advances and increase in operating expenses.

During 1996-97, the bank had adjusted its accumulated losses of Rs. 1,000 crores against the paid up capital which consequently came down to Rs. 333.60 crores. This will increase to Rs. 444.80 crores after the present issue.

The capital adequacy ratio was 9.15 per cent on March 31, 2000. Gross NPA to gross advances ratio dropped from 22.59 per cent in March 1996 to 13.18 per cent in March 2000 while net NPA to net advances fell from 8.65 per cent to 7.65 per cent. The bank is adopting various strategies to minimise the level of NPAs.

Mr. Shastri pointed out that the bank had made considerable progress in the adoption of information technology. He felt that information technology, networking, and globalisation were expected to yield considerable benefits to the bank. The bank had also provided remote terminals to many branches. Around 300 clients - borrowers or depositors - have access to their accounts with IOB branches.

In addition to the core business, the bank is involved in other activities like bullion business and forex. Mr. Shastri observed that the bullion business was started in November 1997. So far, the bank had a turnover of Rs. 8,945 crores under this segment. Besides, it had launched the gold deposit scheme for the general public. It had been active in the forex market for the last few years and the division's turnover was Rs. 81,000 crores.

Mr. Shastri said the retail segment offered a lot of potential and IOB would be focussing on housing finance, service sectors and the like. The bank has a well diversified loan portfolio spread over industries, trade and service sectors. However, the largest exposure to any particular industry is three per cent of total assets.

Customer service is another area where the bank has been doing reasonably well. On an experimental basis, it has set up an exclusive office in Chennai to redress customer grievances and if it is successful, the bank plans to extend this facility to Mumbai and Delhi.

``For the current year and for the coming years, the bank's thrust is recovery,'' explained Mr. Shastri. ``We are getting encouraging results from the thrust which we have given. We have projected a gross profit of Rs. 250 crores for the current year and we are confident that we will reach it comfortably.''

With the bank on the right trajectory of growth, Mr. Shastri assured potential investors that they would benefit significantly in the coming years.

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