Shares of select state-run lenders tumbled as much as 10 per cent during the trading session on Wednesday as the clarity emerged that these lenders have received the approvals for raising funds via qualified institutional placement (QIP) route, but not strategic stake sale by the central Government.
State-run banks (PSBs) including Indian Overseas Bank, Central Bank of India, UCO Bank, IDBI Bank, Punjab & Sind and Bank of Maharashtra tumbled up 10 per cent, after a sharp rally in the previous trading session as investors took the profits off the table.
On Tuesday, media reports surfaced claiming that the government is likely to approve strategic stake sale, which sparked up to a 20 per cent rally in these counters. However, the fundraising exercise shall be through the QIP route and the fundraising will be executed in small tranches, kicking off from the March 2024 quarter. The clarity led to a sharp profit booking in these counters.
Indian Overseas Bank cracked 9.91 per cent to Rs 49.23 on Wednesday, against its previous close at Rs 54.11 on Tuesday. The Central Bank of India dropped 8.6 per cent to Rs 50.72, while UCO Bank cracked over 8.45 per cent to Rs 41.63 during the trading session. IDBI Bank dropped 7.87 per cent to Rs 71.55.
Result bound Punjab & Sind Bank and Bank of Maharashtra was down 5.5 per cent each to Rs 45.08 and Rs 49.90 for the day, respectively. Both the lender's are slated to announce their earnings for the December 2024 quarter later today, that is, on Wednesday, December 15.
The Department of Investment and Public Asset Management (DIPAM) has also been mandated to divest stakes in these PSBs through the offer for sale (OFS) route. The government is trying to meet the 25 per cent minimum public shareholding norms within these PSU banks by August 2026.
The government holds a 98.25 per cent stake in Punjab & Sind Bank, while it owns a 96.38 per cent stake in Indian Overseas Bank, 95.39 per cent stake in UCO Bank, 93.08 per cent stake in Central Bank of India and 79.6 per cent stake in Bank of Maharashtra at the end of the December quarter, according to the latest shareholding pattern on BSE. To meet the minimum shareholding requirement, the Government needs to offload a cumulative of Rs 50,000 crore stake in these lenders.