Indian Overseas Bank Reports Positive Q4FY25 Performance, Approves ₹5,000 Crore Fundraise for FY26

Indian Overseas Bank (IOB), the state-run lender, has reported a significant 30% year-on-year jump in standalone net profit for the Q4FY2025, reaching ₹1,051.07 crore, compared to ₹808.10 crore in the same period last year. The bank's Net Interest Income (NII) also saw healthy growth, increasing by 13% year-on-year to ₹3,123 crore. Furthermore, the operating profit before provisions and contingencies for the quarter stood at ₹2,617.92 crore, marking a substantial 33.5% rise from ₹1,961.11 crore recorded in Q4 FY24.

Provisions and Asset Quality Show Improvement

During the March quarter, these provisions stood at ₹200 crore, a marked reduction from ₹400 crore in the preceding December quarter.  Asset quality also demonstrated improvement during the quarter. The Gross NPA ratio declined sequentially to 2.14% from 2.55% in December. On a year-on-year basis, Gross NPA amount fell by 21.3% to ₹5,347.72 crore from ₹6,794.43 crore in Q4 FY24. Similarly, Net NPA improved to 0.37% sequentially from 0.42% in the previous quarter. Year-on-year, Net NPA amount decreased by 25% to ₹911.86 crore from ₹1,216.86 crore, with the Net NPA ratio standing at 0.37% compared to 0.57% in Q4 FY24. The bank's Return on Assets for the quarter was 1.12%, up from 0.94% in the same period last year.

Board Approves Substantial Fundraising for FY26

The bank's board has given its nod to significant fundraising plans for the financial year 2026. The bank intends to raise up to ₹5,000 crore through a combination of equity capital and Tier II bonds. Specifically, the board has approved raising up to ₹4,000 crore in equity share capital. This can be done through one or a combination of methods, including a follow-on public offer (FPO), rights issue, Qualified Institutional Placement (QIP), preferential issue, or any other suitable mode, potentially including Employees' Stock Purchase Scheme (ESPS). 

The funds can be raised in one or more tranches or phases during FY26, subject to obtaining shareholder approval at the upcoming Annual General Meeting (AGM) or an Extraordinary General Meeting (EGM), as well as other necessary regulatory approvals. The bank recently completed a QIP, raising ₹1,436 crore, though the change in shareholding post this exercise is yet to be updated.

Additionally, the board sanctioned raising up to ₹1,000 crore through Basel-III compliant Tier II bonds. This will be done depending upon the bank's requirement, with or without a greenshoe option. These funds may also be raised in one or more phases during FY26, through either private placement or a public issue, conducted in India or abroad.

Market Performance

As of the reporting date, shares of Indian Overseas Bank closed marginally 0.56% higher at ₹37.74, having remained largely unchanged over the past month.

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