Shares of Indian Overseas Bank, Central Bank of India, Punjab & Sind Bank, and UCO Bank surged up to 4 percent on February 25 following reports that the government is considering an offer-for-sale (OFS) to reduce its stake in these public lenders and increase public participation.
According to reports, the Department of Investment and Public Asset Management (DIPAM) has invited bids from merchant bankers to facilitate the government’s proposed stake sale in public sector banks (PSBs) and listed public financial institutions (PFIs).
The selected merchant bankers will be empanelled for a period of three years, with a potential one-year extension. Their role will be to advise the government on the timing and structure of the equity dilution process.
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The OFS initiative is focused on specific public sector banks and listed financial institutions that have yet to meet the minimum public shareholding requirement of 25 percent.
Given this requirement, banks in which the government is likely to conduct an OFS include Indian Overseas Bank, Central Bank of India, Punjab & Sind Bank, and UCO Bank—all of which currently have government shareholding exceeding 90 percent. This move is in line with the government’s broader disinvestment strategy aimed at increasing public participation in state-owned enterprises, improving liquidity, and deepening the capital markets.
More details regarding the OFS timeline and the extent of the stake dilution are expected to emerge as the process advances.
So far this year, shares of Indian Overseas Bank, Central Bank of India, Punjab & Sind Bank, and UCO Bank have tumbled up to 13 percent, underperforming benchmark Nifty 50's 5 percent drop during the same period.
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