Trending Large Cap Stock : LIC scales up BOI stake by 3.12%; BOI stock up by 0.60%
DSIJ Intelligence / 17 Jul 2017
The government owned Bank of India (BOI) sold 33,500,000 shares equivalent to over 3.12% equity through an open market purchase on a preference share allotment basis on June 28, 2017, as per regulatory filing.
A day after the global credit rating agency Fitch cut Bank of India's (BOI) viability rating to ‘b+’ citing the fall of its core CAR to 7.2% and weak internal capital generation, Life Insurance Corporation of India (LIC) turned out to be a saviour by buying an additional stake of more than 3% for about Rs 450.88 crore.
The government owned Bank of India (BOI) sold 33,500,000 shares equivalent to over 3.12% equity through an open market purchase on a preference share allotment basis on June 28, 2017, as per regulatory filing.
Calculated on the stock weighted average price (WAP) of Rs 134.59 apiece, the valuation of the deal comes to over Rs 450.88 crore. With this, LIC's stake in the bank has gone up to 14.25 per cent from the earlier 11.13 per cent.
Over the past two fiscals, BOI has been posting losses on account of stressed loans and higher provisioning leading to an erosion of its capital base. PSUs require capital to recognize bad loans and to enhance their ability to extend credit.
BOI posted a loss of Rs 1558.34 crore for FY17, but the bank expects to post a profit by the end of second quarter of the current fiscal. Getting equity support at this stage will bolster BOI’s capital for a better migration towards Basel III norms and help continue deleveraging of corporate loan book towards granular assets.
With LIC scaling up its stake and a higher provision coverage ratio of about 60%, BOI is expected to resume growth in the current fiscal.
Post-announcement, the stock of BOI closed higher by 0.60% at Rs 141.35 on the BSE.
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