Indian Bank

Issue details

Bid/Issue opens: Feb 05, 2007
Bid/Issue closes: Feb 09, 2007
Price Band: Rs 77-91
Minimum application: 75 shares and in multiples of 75 shares thereof
Maximum Retail Bid Amount: Rs 100,000

Capital Structure

Authorised Capital: 1,500,000,000 equity shares of Rs 10 each

Equity shares outstanding prior to issue: 343,820,000 equity shares of Rs 10 each

Equity shares outstanding after the issue: 429,770,000 of Rs 10 each

Present Issue: 85,950,000 equity shares

Employee Reservation Portion: Up to 8,595,000 equity shares

Net Issue to the public:77,355,000 equity shares

Background

Indian Bank is a leading public sector bank with the largest network of branches in Tamil Nadu. As on Sept 30, 2006, it had 1,408 branches in India spread over 26 states and 3 union territories. They also have a branch in Singapore and a branch and foreign currency unit in Colombo, Sri Lanka. The Indian Bank Ltd, the predecessor of Indian Bank, was founded as a “Swadeshi Bank” due to the efforts of Sri V Krishnaswami Iyer and others. The bank was incorporated on March 5, 1907 and commenced operations on August 15, 1907.

Indian Bank has three subsidiaries – Ind Bank Housing Ltd, Indbank Merchant Banking Services Ltd and Indfund Management Ltd. The housing and merchant banking subsidiaries are already listed on BSE.

Objectives of the issue

The main objectives of the issue are:

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To augment its capital base to meet future capital requirements arising out of the implementation of the Basel II standards and growth in assets, primarily loan and investment portfolio due to the growth of the Indian economy
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To fund other general corporate purposes including meeting the issue expenses

Key Points

Improving asset quality
Net non-performing assets (NPAs) have come down to an impressive 0.45% at the end of Sept 2006, from as high as 8.30% in FY02. Recovery in bad debts w/off has been continuously rising from Rs.63.2 crore in 2002 to Rs. 181.4 crore in FY06.

Restructured capital base
In Sept 2006, during a restructuring of its capital base, aggregate accumulated unabsorbed losses of Rs 3,830 crore were netted against the paid-up capital of Rs 4574 crore end March 2006. The retention of the balance Rs 743.82 crore was Rs 400 crore in perpetual non-cumulative preference share capital and Rs 343.82 crore in equity share capital.

Going rural through financial inclusion
Indian Bank has traditionally a strong presence in the rural and semi-urban areas. There is substantial potential for expanding business by increasing their focus and leveraging its strength in these areas, including rolling out new products and services and increasing the accessibility of products. Bank has been focusing on playing an active role in providing micro-finance through self-help groups (SHGs). We believe that financial inclusion would pave the way for marketing of our products and services to people who do not have access to banking services.

Growing advances
Advances have grown at a CAGR of 26.16% over FY04 to FY06. The bank has recently carved out small and medium enterprises (SMEs) as a separate segment and as at Sept 30, 2006, this segment accounted for 19.76% of its total outstanding advances of Rs 26,192 crore.

Maintaining spreads
Spreads have improved to 3.43% as at end Sept 2006, from 3.32% in FY04. However with rising cost of funds, spreads will come under pressure as most of its deposits are in form of term deposits and its CASA is at around 35%.

Financials

Indian Bank’s net interest income grew by 15.84% from Rs 1303.62 crore in FY05 to Rs 1,510.17 crore in FY06. Over the same period, net profits rose 53.56% from Rs. 318.7 crore to Rs 489.4 crore. For the six- month period ended Sept 2006, PAT increased 42.37% to Rs 334 crore from Rs 234.6 crore. Deposits and net advances have grown at a CAGR of 15.77% and 26.16%, respectively during the last three fiscal years. Total assets have grown from Rs 35,040.7 crore in FY04 to Rs 50,813 crore in Sept 2006. As on Sept 30, 2006 , the bank’s net worth was Rs 26,01.6 crore.