Another speculative, but positive news came on Bank of Maharashtra (BoM) over the weekend. One reputed Media Network, who broke story on IOB & Central Bank as possible contenders for privatisation (though this story was vehemently rejected, denied criticised by us), has speculated on Rs. 2,000 cr. QIP by BoM.

Bank of Maharashtra is looking to launch Rs. 2,000 cr. QIP next month and also looking to raise additional Rs. 1,000 cr. through tier 1/2 bonds, both for growth capital. This fund raise will boost bank’s capital adequacy ratio (CAR) of 14.5% and help growth advances by Rs. 25,000 cr. to 1.27 lakh cr., thereby maintaining 18% growth rate in advances, which was clocked in FY21.  If this happens, will be seen a pre-cursor to privatisation, to have better value monetization by Government. Similar move was taken by Govt. in Hind Copper as well, which made share price rise by 50% over QIP rate, in less than 2 months.

Bank’s BVPS as of 31.3.21 stood at Rs. 12.2 and since the QIP will be at a premium to book value (although QIP is not yet finalised), it will be book value accretive, making historic PBV slip below 2x, from current 2.2x. It will also reduce government’s holding to about 83%, from current 93%, paving way for further corporate development.

Our positive view on BoM continues, as picture abhi baaki hain!

This is not a buy recommendation, while stock recommendations are provided exclusively to our paid members in the Member Zone.