IOB Shares Dip 4% as Government Plans to Sell 3% Stake

Indian Overseas Bank (IOB) saw its shares fall by 4% to ₹35.01 on Monday, December 17, following the government's announcement that it would sell up to 3% of its stake in the state-owned bank through an Offer For Sale (OFS). The floor price for the OFS has been set at ₹34 per share.

The floor price represents a discount of 7% compared to the previous day's closing price of ₹36.6.

Based on the current market price, the government anticipates raising approximately ₹2,000 crore through the sale of up to a 3% stake in IOB.

As of September 30, government holdings in IOB amounted to nearly 95%, representing over 18 billion shares, according to data from the National Stock Exchange.

This move aligns with regulations set by the Securities and Exchange Board of India (SEBI) that require all listed companies, including public sector entities, to maintain a minimum public shareholding of 25%. SEBI has granted public sector financial institutions forbearance until August 2026 to meet this requirement.

Besides IOB, there are three other lenders where the government's stake exceeds the minimum public shareholding threshold: Punjab & Sind Bank (93.9%), UCO Bank (91%), and Central Bank of India (89.3%).

Earlier in December, the government initiated an offer for the sale of up to 6% of its stake in the Bank of Maharashtra.

IOB's shares have fallen 31% so far in 2025, while the Nifty PSU Bank index has risen by nearly 27% during the same period.

IOB disclosed in a regulatory filing that the government intends to sell up to 38.51 crore shares, representing a 2% base offer size, with the option to sell an additional 19.25 crore shares, representing 1% of the bank's total issued and paid-up equity share capital.

Arunish Chawla, Secretary of the Department of Investment and Public Asset Management (DIPAM), announced on X (formerly Twitter) on December 16 that the OFS would open for non-retail investors and retail investors could bid on Thursday. The government is offering to disinvest 2% equity in the bank, with an additional 1% as a greenshoe option.

The government currently holds a 94.61% stake in the Chennai-based bank.

IOB also stated that up to 150,000 shares, equivalent to 0.001% of the bank's total issued and paid-up equity share capital, may be offered to eligible employees, subject to approval and in accordance with OFS guidelines. Eligible employees can apply for shares worth up to ₹500,000.