Bank of Baroda Raising Around Rs 1550 crore

Compliance is a buzzword today. While many companies are busy trying to bring down their promoter holdings to desirable levels (less than 75%), banking companies are busy shoring up their capital to meet Basel III norms. Among the many, Bank of Baroda is one which has currently lined up a capital issue in order to shore up its CAR. According to media reports, Bank of Baroda's (BOB) board has approved raising around Rs 1550 crore by issuing equity shares on a preferential basis to the government of India. The price at which the allotment would be made and the number of shares that would be allotted is yet to be known.

However, at its current market price of Rs 856 per share BOB would probably issue approximately 1.81 crore equity shares to the government. With this, the governments’ holding in the company would increase from the current 54.31 per cent (as on 30^th Sept 2012) to roughly around 56.23 per cent. The move will definitely help the bank in shoring up its Capital Adequacy Ratio (CAR), which will improve from the current 12.91 per cent to around 13.46 per cent going ahead. Further, Tier I CAR would stand at 10.12 per cent against the existing 9.57 per cent after the issue. The stock is currently trading at PE of 6.7x which after the issue would probably increase by 30 basis points to trade at 7x.BOB disappointed the streets with its September quarter numbers. Its Net Interest Income (NII) increased by 11.5 per cent to Rs 2862 crore and Net Profit also grew by 11.6 per cent to Rs 1301 crore. The bank faced headwinds in terms of Net Interest Margin (NIM) and also saw a rise in its NPAs which is not a very good sign. The table shows some key financial parameters for the bank which could be good pointers to its fundamentals.