Government to sell up to 3% stake in Indian Overseas Bank via OFS, sets floor price at Rs 34/share

The government is set to reduce its holding in Indian Overseas Bank (IOB) by up to 3% through an offer for sale (OFS) that begins on December 17. The floor price for the OFS has been fixed at Rs 34 per share.

The stake sale will occur via the OFS mechanism, with the government initially offering 2% of IOB's equity, equivalent to 385,131,796 shares, to non-retail investors on Wednesday. Retail investors will have the opportunity to participate on Thursday, December 18. The government also retains the option to sell an additional 1% stake, or 192,565,898 shares, through a green shoe option.

The floor price of Rs 34 represents a discount of approximately 7% compared to IOB's closing price of Rs 36.55 on the NSE. At the set floor price, the OFS is valued at over Rs 19.64 billion.

Indian Overseas Bank had announced the planned divestment after market hours on Tuesday. Following the announcement, IOB shares experienced a decline of over 1%.

According to the exchange filing, allocations will be made at or above the floor price based on price priority, adhering to OFS guidelines. Retail investors have the option to bid at or above the cut-off price, potentially receiving an allocation price below the floor price due to a retail discount.

Goldman Sachs (India) Securities Private Limited is managing the offer.

IOB's stock performance has been weak, with a 34% decrease over the past year. This underperforms the Nifty PSU Bank index, which has risen by 16% during the same period, and the broader Nifty index, which has gained 5%. Trendlyne data indicates that the stock is trading below its 50-day and 200-day simple moving averages (SMAs) of Rs 39.1 and Rs 39, respectively, and exhibits high volatility with a one-year beta near 1.3.