New Delhi, August 14: Foreign institutional investors have shifted their focus to Bank of Baroda on the bourses. With little or no room for entry into their financial and banking favourites like State Bank of India, HDFC, HDFC Bank, etc., FIIs have started chasing the BoB scrip. According to a senior official of the bank, FIIs who had missed the bus at the time of the initial public offering, hold nearly four per cent of the bank's equity today.

Although there is plenty of room for accumulation as the investment ceiling is far away, it is learnt that FIIs with large orders are virtually chasing small investors who hold less than 1,000 shares. The result: the BoB scrip has shot up by nearly 20 per cent in the last three trading sessions touching a high of Rs 173 on BSE on Wednesday.

Over two lakh shares, each on Tuesday and Wednesday, changed hands on BSE with the supplies coming mainly from domestic institutions who were seen booking profits, say brokers. The volumes in the scrip, since its listing in February this year, have been low ranging from 100 to 9,000 shares.

One of the reasons for such low volumes is that apart from the government, the equity is widely held by a large number of small shareholders. As many as 2.7 lakh or 90 per cent of the public shareholders are small investors holding less than 1,000 shares. The government holds 66.2 per cent of the Rs 296 crore equity of the bank. Most of the retail investors hold 100 to 500 shares and they are scattered in small towns and rural areas largely in Gujarat and Rajasthan, according to the official. It is for this reason that FIIs, the only major buyers, have not been in a position to pick up substantial chunks of the stock from the market, it is learnt.

Although the bank had reserved nearly 2 crore shares out of its Rs 850 crore mega issue for FIIs, NRIs, OCBs etc, FIIs did not participate in the issue, says the bank official. The FII absence in the initial offering was partly due to the timing (December is year-end account closing for most FIIs). The other reason cited is the time lag between application and allotment of shares, while FII rules permit payment only on delivery.

The bank did not collect the entire amount on application from domestic investors. Investors had to pay Rs 25 on application and Rs 25 on allotment, while the balance on first and final call. The bank has now made the final call for the balance Rs 35, to be paid by investors before September 15. The fully-paid stock was very limited, in that the NRIs, OCBs and FIIs applying under the reserved category had to pay the full amount.

The partly-paid (Rs 50 paid-up) scrip too has been rising, registering a gain of nearly 100 per cent. On the initial public offer of Rs 85, today the BoB scrip gives a return of around 100 per cent purely based on capital appreciation.

BoB managed a net profit growth of 33 per cent to Rs 276 crore during 1996-97 giving an earning per share of Rs 10.90 on an equity capital of Rs 296 crore. With a capital adequacy ratio of 11.8 per cent, the bank's net NPA level is around 7.9 per cent, the bank's global deposits have risen from Rs 28,370 crore in 1995-96 to Rs 32,157 crore. Advances increased from Rs 16,013 crore to Rs 16,532 crore.

Market sources point out that after SBI, FIIs see BoB as the second best among public sector banks. FII investments are heading towards the ceiling in SBI, while they have already crossed the limit in HDFC.

Besides, with large accumulations already taking place in HDFC Bank, brokers see FIIs turning their attention to BoB.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.