Shares of Indian Overseas Bank (IOB) witnessed significant selling pressure on Wednesday, December 17, after the government launched an Offer for Sale (OFS) to divest a stake worth ₹1,960 crore. The state-owned bank's stock price declined over 5% following the announcement, reflecting immediate market sentiment.
IOB OFS: Key Details and Market Reaction
The government has set the floor price for the IOB OFS at ₹34 per share. This price represents a discount of approximately 7% compared to the stock's previous closing price of ₹36.57 on the BSE. Reacting to the news, the IOB share price dropped to an intraday low of ₹34.57, marking a decline of 5.45%. Around 1:50 PM, the stock was trading at ₹34.63.
The OFS involves a base offer size of up to 38.51 crore shares, which is 2% of the bank's equity. Furthermore, there is an option to sell an additional 19.25 crore shares, constituting another 1% of the total paid-up capital. A small portion of 1,50,000 shares (0.001%) has also been reserved for eligible bank employees.
The subscription window for institutional investors opened on Wednesday, December 17. Retail investors can place their bids on Thursday, December 18, which is also the final day of the offer.
Analyst Views: Should Retail Investors Participate?
This OFS marks the second such offering by a public sector bank in December, following Bank of Maharashtra. The IOB stock has had a challenging run, shedding 37% of its value in the past one year and 33% on a year-to-date (YTD) basis. Even the last three months saw a 15% decline, indicating weak investor confidence.
This trend persists despite IOB reporting a strong operational turnaround. The bank's net profit for H1 FY26 surged 66% year-on-year to ₹2,337 crore, with Q2 FY26 profit growing 58% YoY. Its asset quality is among the best in the PSU bank space, with Gross NPA at 1.83% and Net NPA at a minimal 0.28%. Capital adequacy is robust at 17.94%, and Return on Equity (ROE) has improved to 20%.
However, the stock trades at a valuation of 1.94x earnings, a premium to many PSU bank peers. This mixed picture has led to divergent views among market experts.
G Chokkalingam, Founder of Equinomics Research, noted that while the valuation at 1.9x price to adjusted book value is slightly stretched, the bank's asset quality, solid credit growth, and high share of low-cost deposits make it an attractive long-term bet.
Conversely, Abhinav Tiwari, Research Analyst at Bonanza, stated that the OFS is not a compelling buy for retail investors. He pointed to the persistent gap between improving fundamentals and weak stock performance, suggesting market caution on earnings durability. He advised long-term value investors to participate only with a small allocation, while short-term traders should avoid it.
Vinit Bolinjkar, Head of Research at Ventura, echoed this caution. He highlighted that the narrow 3-4% discount of the OFS price to the prevailing market price offers limited arbitrage, making short-term gains risky due to potential volatility. He concluded that it is not an ideal opportunity for investors seeking quick returns.
Technical Outlook for IOB Shares
From a technical perspective, IOB is currently in a corrective phase. Key support levels are identified around ₹34-₹34.50, which aligns with the OFS floor price. Any upward movement is likely to face resistance in the ₹37-₹39 range. A decisive break above ₹40.50 would be considered a bullish signal for the stock.
Disclaimer: This article is for informational purposes only. The views and recommendations are those of individual analysts and not of the publication. Investors are strongly advised to consult with certified experts before making any investment decisions, as market conditions are subject to rapid change.
