Indian Bank FPO Review

 

Indian Bank FPO Review

Indian Bank is the public sector bank which is planning to raise Rs.1600 crores by follow on offer (FPO). The FPO will hit the market in June 2011 and the board has already approved the proposal.

The bank won’t sell its own shares to the public. But it will issue 10% fresh new shares to the public. Right now the current equity base is around 430 crore shares.

Right now, the government of India holds 80% of its shares. By issuing fresh equity, the existing equity will be diluted by 10%.

Indian bank is mainly in the business of lending money and this FPO money will go to fund its core business and that is lending. Thus, this is really a good thing.

Many promoters sell the shares of their companies to raise capital for themselves but well, here the company will use the capital to fund its own core business.

This is a sign of strong fundamentals. I advise you to fill this FPO. This is because I personally feel that the fundamentals of the company are strong. And it has a cash reserve of Rs.2000 crores which is a great thing.

In fact, the bank will achieve a credit growth of 29 per cent in the current fiscal and a deposit growth of up to 23 per cent, both of which are above the industry average.

This shows that the fundamentals of the company are really strong. And I will give it 3 and half stars out of 4 stars. So go for it.