After SBI, BoM at govt door, market is an option

Bank of Maharashtra (BoM), a state-owned bank, could look to raise equity from the capital market if the government does not allocate the money. According to M G Sanghvi, executive director, Bank of Maharashtra, the bank has headroom since the government holding is at 79%. He said the bank was allocated Rs 1,800 crore as part of the public sector bank capitalisation plan.

“The government has so far provided for Rs 350 crore and Rs 588 crore in two tranches,” he told Firstpost on the sidelines of the FICCI-Indian Banking Association event in Mumbai.

Sanghvi said the government is processing the request. When told that SBI, the largest public sector bank, is also seeking government capital injection, Sanghvi clarified that the government would have to make a different allocation from the Rs 6,000 crore recapitalisation plan announced in the Budget in February 2011.

He argued that the appetite for equity would be good since the public sector bank had strong fundamentals. BoM market cap stands at Rs 2,495 crore.

BoM shares have outsmarted the broader market and the peer group over the past one month. BoM shares fell 7.9% over the past one month while the BSE Bankex fell 16%. Many other banks have lost close to 20% in market value in the sell-off on concerns of a pressure on profitability.

Listen to Sanghvi speaking to Firstpost. He plays down the impact of the slowdown in credit growth.