Merchant bankers appointed to manage the upcoming qualified institutional placements (QIP) of five nationalised banks have likely been mandated by DIPAM to rope in as many foreign investors as possible during roadshows, Moneycontrol has leant from sources, just days after robust investor interest seen for SBI’s share placement.
Highly-placed sources aware of the ongoing QIP discussions have told Moneycontrol that the objective of this round of fund raise is not just to reduce government holdings in these banks, but also to broad-base the shareholding. “Reasonable efforts have gone into strengthening the quality of financials of PSU banks and the expectation is that it should reflect positively in the upcoming QIP,” said a senior executive of a PSU bank who didn’t wish to be named. Accordingly, merchant bankers for the upcoming QIPs of PSU lenders have been told to reach out to as many foreign investors as possible during the roadshows. “Domestic and foreign roadshows are ongoing,” one banker confirmed.
Under the Banking Regulation Act, foreign stake in PSU banks can’t go over 20 percent and the government is required to hold a minimum 51 percent stake in the lenders.
The shareholding pattern of PSU banks shows that foreign portfolio investors hold 1.89 percent stake in Bank of Maharashtra, 0.08 percent in Indian Overseas Bank, 0.13 percent in UCO Bank, 0.97 percent in Central Bank of India, and 0.25 percent in Punjab and Sind Bank, as on June 30, 2025. Thus, the government believes that there is ample scope for FPIs to invest in these PSBs.
Among the five banks chosen for the current round of QIP, Bank of Maharashtra could attract high investor interest. “Bank of Maharashtra is one of the best cases of turnaround in the PSU space and is invoking reasonable interest with domestic investors so far,” said another merchant banker. Trading at 12-month trailing valuations of 1.28x price to book, BoM’s financial metrics such as net interest margin, return on assets and return on equity at 3.95 percent, 1.80 percent, and 23 percent respectively is at par with some of the mid-sized private banks, if not better. Read More
Bank of Maharashtra’s loan book stands at Rs 2.41 lakh crore as of June 30, 2025, up from Rs 94,889 crore in FY20, with Government of India holding 79.60 percent stake while mutual funds accounting for 0.97 percent holdings, as per June quarter filing.
The bankers to the QIP have also been asked to obtain feedback from investors about these PSU banks, said sources. “While the effort is to garner as much foreign investor interest as possible, the objective is also getting an opinion from investors on the avenues they would like to be improved and what could be done from a governance and operations perspective to improve the appeal of PSU banks among investors, both domestic and foreign,” said a source cited above.
The recent success of State Bank of India’s Rs 25,000 crore QIP, which invoked substantial interest from foreign investors is said to have set higher expectations for upcoming fund raise of smaller PSU banks. SBI’s QIP received a robust demand and was oversubscribed 4.5 times, with foreign investors accounting for 64.3 percent of total demand. Marquee long-term investors received 88 percent of the final allocation, including 24 percent of the issue size placed with foreign long-term investors.
The government is progressing with its stake divestment plans through the Offer for Sale (OFS) route in five PSU banks. Bank of Maharashtra, Indian Overseas Bank, UCO Bank, Central Bank of India and Punjab and Sind Bank have been shortlisted for partial disinvestment in the coming months.
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