2 PSU stocks in focus after Govt. plans to raise ₹7,000 Cr via QIP

SYNOPSIS: Two PSU banks are in focus after announcing plans to raise Rs. 7,000 crore via QIPs, aligning with the government’s broader push to boost capital adequacy and meet minimum public shareholding norms.

Back in July 2025, the government signalled a fresh push to strengthen the capital base of public sector banks (PSBs). It indicated that state-owned lenders could collectively raise around Rs. 45,000 crore in FY26 through qualified institutional placements (QIPs), as part of a broader plan to mobilise capital and gradually reduce government ownership in these banks.

Among the country’s 12 PSBs, five had to meet this threshold. These included UCO Bank, Central Bank of India, Punjab & Sind Bank, Bank of Maharashtra, and Indian Overseas Bank, where public shareholding currently ranges between just under 2 percent and around 13.54 percent, highlighting the scale of dilution still required.

This strategy ties into a regulatory requirement that all listed companies, including public sector entities, maintain a minimum public shareholding (MPS) of 25 percent. To align with these norms, the finance ministry has asked select PSU banks to raise their public float, bringing them in line with the Securities Contracts (Regulation) Rules.

Adding to this momentum, Indian Overseas Bank and Punjab & Sind Bank have recently announced plans to raise a combined Rs. 7,000 crore in Q4 FY26 through selling shares to institutional investors. These moves reflect a broader effort to improve capital adequacy while steadily widening public ownership across PSU banks and complying with the norms.

Indian Overseas Bank (IOB)

With a market cap of Rs. 69,516 crores, the stock closed in the green at Rs. 36.1 on Wednesday, up by around 2 percent, as against its previous closing price of Rs. 35.45 on BSE. As of the September 2025 shareholding pattern, the President of India hold a dominant 92.44 percent stake in the bank.

The lender has announced plans to raise Rs. 4,000 crore via a QIP in the current quarter. Speaking on Wednesday, Managing Director Ajay Kumar Srivastava said the bank has secured all necessary approvals for the fundraise and is currently in the process of appointing merchant bankers. The capital raise could take place as early as next month or in March, depending on market conditions.

The bank’s MD further highlighted that the proposed QIP is expected to help reduce the government’s stake by around 4 percentage points from current levels. The promoter holding had already declined in December after the government diluted 2.17 percent via an OFS, bringing its stake down from 94.61 percent. However, Srivastava acknowledged that meeting the regulatory requirement of 25 percent MPS by the August 2026 deadline could be challenging for the bank.

Punjab & Sind Bank

With a market cap of Rs. 20,059 crores, the stock closed in the green at Rs. 28.27 on Wednesday, up by around 4 percent, as against its previous closing price of Rs. 27.31 on BSE. As of the September 2025 shareholding pattern, the President of India hold a 93.85 percent stake in the bank.

Punjab & Sind Bank has called an extraordinary general meeting (EGM) scheduled for 21st January to seek shareholder approval for raising up to Rs. 3,000 crore in equity capital via a QIP.

The bank has stated that the proposed fundraising will support its expanding business needs, help maintain compliance with Basel-III capital norms, and move it closer to meeting the MPS requirement. The proposal was disclosed through a stock exchange filing dated 30th December.

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