The government’s offer for sale (OFS) in Central Bank of India witnessed strong investor demand, getting oversubscribed 2.35 times on the first day of the issue. The robust response has prompted the government to exercise the green shoe option to sell an additional 4% stake in the public sector lender.
OFS Details and Subscription
The OFS, which opened for non-retail investors on Wednesday and for retail investors on Thursday, saw bids for 30.48 crore shares against the base offer of 12.97 crore shares. The base offer size was 5% of the paid-up equity capital of the bank. With the green shoe option, the total sale could go up to 9% of the paid-up equity capital.
Price Band and Investor Response
The floor price for the OFS was set at Rs 47 per share. At this price, the government could raise up to Rs 1,432 crore from the base offer and an additional Rs 1,146 crore from the green shoe option, totaling Rs 2,578 crore. The strong subscription indicates confidence in the bank’s fundamentals and the government’s divestment program.
Green Shoe Option Mechanism
The green shoe option, also known as an over-allotment option, allows the selling shareholder to sell additional shares if demand exceeds the original offer. In this case, the government will sell an extra 4% stake, taking the total stake sale to 9%. This option is commonly used in OFS to capitalize on excess demand and maximize proceeds.
Government’s Divestment Strategy
The Central Bank of India OFS is part of the government’s broader disinvestment plan for public sector banks. The government aims to reduce its stake in these banks while ensuring they remain well-capitalized. The successful OFS will help the government meet its budgeted disinvestment targets for the current fiscal year.
Post the OFS, the government’s stake in Central Bank of India will decrease from the current 93.08% to around 84.08% after the full exercise of the green shoe option. The bank’s shares closed at Rs 48.70 on the BSE on Wednesday, up 3.07% from the previous close, reflecting positive market sentiment.
